Katmandu Corp. is a C corporation that began operations in Year 1. Katmandus Year 1 through Year
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Question:
Katmandu Corp. is a C corporation that began operations in Year 1. Katmandu’s Year 1 through Year 3 taxable earnings and profits are as follows:
Year | E&P | ||
1 | $ | (10,000 | ) |
2 | 5,000 | ||
3 | 10,000 | ||
On the last day of Year 3, Katmandu makes a $20,000 cash shareholder distribution, distributed equally among its two shareholders, Edgar and Allan. Assuming Edgar has sufficient basis in the Katmandu Corp. stock investment, what amount, if any, of Edgar’s distribution is a nontaxable return of capital?
Multiple Choice
$5,000
$0
$7,500
$2,500
Related Book For
South-Western Federal Taxation 2018 Comprehensive
ISBN: 9781337386005
41st edition
Authors: David M. Maloney, William H. Hoffman, Jr. , William A. Raabe, James C. Young
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