Using The Big Picture case at the beginning of Chapter 19 of the textbook, prepare a letter to the client discussing the income tax effects of the distributions to the corporation and its shareholders.

Plinwell loe Crram Corporition CPlainseli, a premium ice cream mamufacturer, has had a very profluable yeur. To share its profits with is two equal shareholken, Waffle Cone Corporation and Luis, it distrbutes cesh of $200,000 to Waifle Cone and nal eitate wonth $300,000 (adisased basis of $20,0009 to tatis a mamied taxpayer fling a foint return) The real etale is sabject to a mortgage of $100,000, which luis assuenes. The distabution is made on December 31 . Plaimudi year end Piainwell has faad boch good and bod years in the pass, More offen than not, however, it has lost maney Despite this year's fecond profits, the GAAP-based balance aheet for Hainwell indicares a year-end deficit in tetained camings. Consequently, the diatribukion of cast and land b tivied as a liquldating distribution for financil reporting purposes resulting in a reduction of Plainweils paid-in capital account. The tax consequenoes of the distrbutions to Plainwell and its shareholders depend on a variety of Eictors that are not diectly relared to the firuncial erporting uratnvent. Wererify these, foctors, and explain the rax effects of the ditributions to both PGinwell ke Cream Corponition and its two stareholdeer. Rendif the chapter as d Jormafate jour myonte