Toy Corporation distributes $175,000 in cash ($1.75 per share) when its current and accumulated earnings and profits

Question:

Toy Corporation distributes $175,000 in cash ($1.75 per share) when its current and accumulated earnings and profits are $40,000. What is the effect of the distribution for Bernice, who owns 500 shares of Toy stock for which she paid $8,000? Write a letter to Bernice explaining the tax results using the income tax concepts discussed in the text.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...