Pearl has been the sole shareholder of a calendar year S corporation
since 1980. At the end of 2002, Pearl's stock basis is $15,500, and
she receives a distribution of $17,000. Corporation level accounts are
computed as follows:

AAA                    $6,000
PTI                     9,000
Accumulated E & P         600

How is Pearl taxed on the distribution?

---

Clarification of Question by alpa_sanjay-ga on 09 May 2003 16:20 PDT

We are talking about USA

Hi there,

Once again I found the answer by searching for phrases in the text of
the question, which led me to a page at the Oglethorpe University
site:
http://216.239.33.104/search?q=cache:gVtAc05yF5cC:www.facstaff.oglethorpe.edu/jturner/ou/CorpTax/CTxExams/CTxX3%2520spring%252001%2520complete.doc+%22Corporation+level+accounts+are%22&hl=en&ie=UTF-8

Answer:


Total distribution                $18,000 
 
From AAA (not taxable)             (6,000)
 
Balance                           $12,000 
 
From PTI (not taxable)             (9,000)
 
Balance                           $ 3,000 
 
From AEP (taxable dividend)          (600)
 
Balance                           $ 2,400 
 
From stock basis (not taxable)       (500)
 
Balance                           $ 1,900 
 
Gain from sale or exchange (LTCG)  (1,900)
 
                                  $     0 
 

Best wishes,
robertskelton-ga