QUESTION $4($CHAPTER $19)$

Griffey Corporation has $40,000$ of accumulated EP and incurs a loss of $$30,000$ for the year. The loss

accrues ratably through the year. On June $1,$ Griffey Corporation distributes $40,000$ to its sole

shareholder, Ken. How much of the distribution will get dividend treatment? How much of the

distribution will reduce Ken's basis in his Griffey stock?

Dividend income: $$.$

Reduction in stock basis: $$.$