Tammy organized Sweet Corporation in January of the current year and the Corporation immediately elected to be

Question:

Tammy organized Sweet Corporation in January of the current year and the Corporation immediately elected to be an S Corporation. Tammy who contributed 40,000 in cash to start the business owns 100 percent of the corporation's stock. Sweet's current year’s results are ordinary income $36,000 and short term capital loss of $5,000. On July 10, Sweets makes a $10,000 cash distribution to Tammy.

a. What income do Sweets and Tammy recognize if any as a result of the distribution?

b. What is Tammy's basis for the Sweets stock on December 31?

Corporation
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