NOTE: ONLY ANSWER PART C

Whether Corporation is owned by John Smith, its sole shareholder. John has a $20,000 basis in his Whether Corporation stock. John is in the 37% tax bracket. Whether Corporation is in the 21% tax bracket.

Whether Corporation has the following balances as of December 31, 2021.

• Accumulated Earnings and Profits (AEP) ($500,000)

• Current Earnings and Profits $ 80,000

On December 31, 2021, Whether Corporation distributes $160,000 to John.

1. What are the tax consequences to John from receiving this distribution from Whether Corporation?

2. How would your answer above be different if instead Whether Corporation had the following balances:

   • Accumulated Earnings and Profits (AEP) $400,000

   • Current Earnings and Profits (350,000)

Assume that John still receives a distribution of $160,000 and has stock basis of $20,000

3. Use the facts in part a, but assume that rather than cash, John received an asset with a fair market value of $160,000 and a basis to the corporation of $120,000.

   • How much tax would John owe from this distribution?

   • What are the tax implications to Whether Corporation? (This is tricky).

NOTE: ONLY ANSWER PART C