At the start of the current year, Blue Corporation (a calendar year taxpayer) has accumulated E & P of $300,000. Blue's current E & P is $180,000, and at the end of the year, it distributes $600,000 ($300,000 each) to its equal shareholders, Pam and Jon. 

Pam's stock basis is $42,000;

 Jon's stock basis is $168,000.

How is the distribution treated for tax purposes?

Pam has the following:

Dividend income: $

Capital gain: $

Stock basis after distribution: $

Jon has the following:

Dividend income: $

Capital gain: $

Answer rating: 100% (QA)

The tax treatment of corporations in the context of dividends and capital gains can be a bit intricate to understand but I can walk you through it ste... View the full answer