Question: Exercise 18-3 (Algorithmic) (LO. 4) Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When

Exercise 18-3 (Algorithmic) (LO. 4) Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When the entity's AAA balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $62,500. Carlota's asset is worth $87,500, and Dave's is worth $75,000 a. How much gain, if any, does the the corporation recognize as a result of the distribution? $ b. By how much, if any, does the distribution increase Dave's gross income? $ c. By how much, if any, does the distribution increase Carlota's gross income? $

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