Exercise 20-12 (Algorithmic) (LO. 1)

Sunset Corporation, with E & P of $328,800, makes a cash distribution of $98,640 to a shareholder. The shareholder's basis in the Sunset stock is $39,456.

a. Determine the tax consequences to the shareholder if the distribution is a nonqualified stock redemption. The shareholder has _________________ (DIVIDEND INCOME/RETURN OF CAPITAL/CAPITAL GAIN) of $__________________.

b. Determine the tax consequences to the shareholder if the distribution is a qualifying stock redemption. The shareholder has _________________ (DIVIDEND INCOME/RETURN OF CAPITAL/CAPITAL GAIN) of $___________________.

c. Determine the tax consequences to the shareholder if the distribution is pursuant to a complete liquidation of Sunset. The shareholder has __________________(DIVIDEND INCOME/RETURN OF CAPITAL/CAPITAL GAIN) of $___________________.