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Assumptions: Use a flat corporate tax rate of 21% for all problems.

For individuals assume a tax rate of 15% for all dividends and capital gains.

Assume there is no Alternative Minimum Tax for this problem.

Assume that all entities are US domestic corporations, taxed under Subchapter C of the IRC unless otherwise noted. The internal revenue codes.

Shadow Corporation had two shareholders, Daniel, and Tiger. Their ownership and basis in the company at January 1, 2021, was as follows:

# Shares Owned Total Basis Date Acquired

Daniel 30 30,000 1/1/2015

Tiger 70 60,000 1/1/2014

On January 1, 2021, Shadow Corporation had accumulated earnings and profits of 100,000 Shadow Corporation had a loss in the current year, resulting in negative current earnings and profits of (100,000)

Shadow made the following cash distributions during 2021 (note these are the total distributions, paid proportionately to each shareholder, in accordance with their ownership).

01-February 50,000

01-July 50,000

01-October 50,000

On August 1, 2021, Tiger sold all his shares to Leo for 80,000 .

A. What are the tax consequences to Daniel as a result of the July 1 distribution?

B. What are the tax consequences to Tiger as a result of the August 1 stock sale?

C. What are the tax consequences to Leo as a result of the October 1 distribution?

D. What are Shadow Corporation's earnings and profits at January 1, 2022?