At the end of 2021, Mint, Inc, had accumulated earnings and profits (AEP) of ($210,000). In 2021, Mint, Inc. had current earnings and profits of $11,000. At year-end, Mint distributes an asset to Hector (the sole shareholder of Mint) with a fair market value of $80,000 and an adjusted basis of $20,000. Hector’s basis in Mint stock (prior to this distribution) is $100,000. Hector has substantial income from other sources and is in the 37% tax bracket.

a. Determine the tax consequences to Hector from receiving this distribution of property.

b. After the distribution, what is Hector’s basis in Mint, Inc. stock?

c. What impact (if any) will this distribution have on Mint’s taxable income in 2021? d. What is the ending balance in Mint’s Accumulated E&P after this distribution of property?

Answer rating: 100% (QA)

Quiz a The tax consequences to Hector from receiving this distribution of property are as follows Because the 210000 accumulated earnings and profits ... View the full answer