Problem $12-28($Algorithmic$)($LO$.6,7)$

On January $1,2021,$ Kinney, Inc., an S corporation, reports $$5,600$ of accumulated E & P and a balance of $$14,000$ in AAA. Kinney has two shareholders, Erin and Frank, each of whom owns $500$ shares of Kinney's stock. Kinney's nonseparately stated ordinary income for the year is $$7,000.$

Kinney distributes $$8,400$ to each shareholder on July $1,$ and it distributes another $$4,200$ to each shareholder on December $21.$ How are the shareholders taxed on the distributions? Ignore the $20\%$ QBI deduction.

Do not round intermediate computations. If required, round your final answers to the nearest dollar.

Erin and Frank each report $$($fill in the blank $1)$

dividend income for the July $1$ distribution and $$($fill in the blank $2)$

each for the December $21$ distribution. Assuming that the shareholders have sufficient basis in their stock, Erin and Frank each receive a

tax$-$free $$($fill in the blank $3)$