Problem 22-25 (Algorithmic) (LO. 6, 7)

On January 1, 2020, Kinney, Inc., an S corporation, reports $6,400 of accumulated E & P and a balance of $16,000 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 $8,000.

Kinney distributes $9,600 to each shareholder on July 1, and it distributes another $4,800 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 1dividend 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, both Erin and Frank each receive a tax-free $fill in the blank 4 distribution from AAA.