At the beginning of the current Year, X Corporation had 4 shareholders (A, B, C and D). Each of the shareholders owned 50 shares (25%) of X stock. Each had an adjusted basis of $10 per share. At the beginning of the current Year X had $4,000 of accumulated E&P. During the current Year X distributed $1,000 cash to each of A, B, C and D, on March 31. On July 1, X redeemed all of D’s shares in exchange for property with a FMV of $5,000 and an adjusted basis of $3,600. On October 31 X distributed $1,000 cash to A, B and C.

1) What income, gain or loss, if any, does A recognize during the Current Year (as a result of all transactions)?
2) What income, gain or loss, if any, does D recognize during the Current Year?
3) What income, gain or loss, if any, does X recognize during the Current Year?
4) What is X’ Accumulated E&P at the beginning of the following year?
5) How would 4)’s answer change if X also had an additional $10,000 of current E&P?

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