Question 21

Fact Pattern for Questions 21 and 22. EFG, Inc. is a calendar year corporation. EFG, Inc. had current earnings and profits of $100,000 and no accumulated earnings and profits when it distributed a total of $160,000, as a nonliquidating distribution, to its two equal shareholders, Jane and Joe. On the date of the cash distribution, Janes basis in her EFG, Inc. stock was $10,000 and Joes basis in his EFG, Inc. stock was $35,000. How much is includible by Jane in her gross income for the current taxable year with respect to the distribution to her?

A. $50,000 dividend income and 0 capital gain.

B. $80,000 dividend income and 0 capital gain.

C. 0 dividend income and $70,000 capital gain.

D. $50,000 dividend income and $20,000 capital gain.

Question 22 Fact Pattern for Questions 21 and 22. EFG, Inc. is a calendar year corporation. EFG, Inc. had current earnings and profits of $100,000 and no accumulated earnings and profits when it made a nonliquidating distribution of a total of $160,000 equally to its two equal shareholders, Jane and Joe. On the date of the cash distribution, Janes basis in her EFG, Inc. stock was $10,000 and Joes basis in his EFG, Inc. stock was $35,000. What is Joes adjusted basis in his EFG, Inc. stock after the distribution?

A. $0.

B. $5,000.

C. $15,000.

D. $35,000.