Question

Holbrook, a calendar year S corporation, distributes $51,700 cash to its only shareholder, Cody, on December 31. Cody's basis in his stock is $62,040, Holbrook's AAA balance is $23,265, and Holbrook has $7,755 AEP before the distribution. According to the distribution ordering rules, complete the chart below to indicate how much of the $51,700 is from AAA and AEP as well as how Cody's stock basis is affected.

Answer 1

Answer;

AAA account balance after distribution was 0

AEP account balance after distribution was 0

Cordy account balance after distribution was $18,095

Explanation:

Holbrook corporation

From AAA account

Distribution from AAA account 8,000 not taxable

Effect on stock basis (8000)

Balance after distribution 0

From AEP account

Distribution from account 7,755 is a taxable dividend, in which it doesn't affect stock basis because it is from a previous S-corporation.

Effect on stock basis 0

Balance after distribution 0

From Cody’s stock basis

Distribution from account 20,680

(51,700-23,265-7,755)

Effect on stock basis (20,680)

Balance after distribution

(62,040-23,265-20,680)= $18,095

Answer 2

Answer:

The chart is shown in the file attached below

Explanation: