PROBLEM 1: A distribution of money is made from an S corporation to its sole shareholder. Determine the tax consequences by completing the table below.

In each case the shareholder's basis is $125,000 at the time of the distribution.

AAA	E&P	Distribution	Tax Free ROC	Capital Gain	Dividend	End Basis	End AAA
250,000	-0-	50,000
250,000	50,000	100,000
150,000	-0-	100,000
150,000	250,000	150,000
50,000	-0-	200,000
50,000	250,000	200,000

Part 2:

Again, the shareholder's basis is $125,000. There is a distribution of property that has a fair market value of $50,000 and a tax basis to the S corporation of $40,000. What is the result of this distribution? This corporation has AAA of $40,000 BEFORE considering the distribution itself.

Corp Gain/	Pre-dist AAA	Distribution Amnt	ROC	CG	End AAA	End Basis

PROBLEM 2: An S corporation that was formerly a C corporation sells an asset for $300,000. The asset had a basis to the corporation of $200,000. This asset is subject to the built-in-gains tax, and all of the gain realized from the sale was built-in at the date of conversion from a C corporation to an S corporation.

Part A: What is the result to the S corporation?

Part B: What is reported to the shareholder as a result of this sale?