Diego owns 70% of Endothon Corporation's stock, while Maria owns the remaining 30%. Diego and Maria have a tax basis in Endothon's stock of $32,000 and $12,000, respectively. 

 

Endothon has current earnings and profits (E&P) of $25,000 and no accumulated E&P. At year-end, Endothon makes a $75,000 distribution: $56,250 to Diego and $18,750 to Maria.

 

What amount of Diego's distribution is treated as a nontaxable return of capital? 

Answer rating: 100% (QA)

To determine the amount of Diegos distribution that is treated as a nontaxable return of capital we ... View the full answer