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Problem 19-32 (LO. 1, 4) At the start of the current year, Blue Corporation (a calendar year taxpayer) has accumulated E & P of $100,000. Blue's current E&P is $60,000, and at the end of the year, it distributes $200,000 ($100,000 each) to its equal shareholders, Pam and Jon. Pam's stock basis is $11,000; Jon's stock basis is $26,000. How is the distribution treated for tax purposes? If an amount is zero, enter "0". Pam has the following: Dividend income: 80,000 Capital gain: $ 9,000 Stock basis after distribution: $ 9,000 x Jon has the following: Dividend income: $ 80,000 Capital gain: $1 0 Stock basis after distribution: 6,000 Feedback Check My Work The importance of corporate distributions derives from the variety of tax treatments that may apply. From the shareholder's perspective, distributions received from the corporation may be treated as ordinary income, preferentially taxed dividend income, capital gain, or a nontaxable recovery of capital. From the corporation's perspective, distributions made to shareholders are generally not deductible