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Holbrook, a calendar year S corporation, distributes $175,600 cash to its only shareholder, Cody, on December 31. Cody's basis in his stock is $210,720, Holbrook's AAA balance is $79,020, and Holbrook has $26,340 AEP before the distribution. According to the distribution ordering rules, complete the chart below to indicate how much of the $175,600 is from AAA and AEP as well as how Cody's stock basis is affected

Distribution from Account Affect on Stock Basis Balance after Distribution
From AAA Account $-8000 $8000 $0
From AEP Account $2500 $0 $0
From Cody's stock basis $_____ $_____ $____

Respuesta :

Answer:

From Basis $52,680 -$52,680 $79,020

Explanation:

As per the data given in the question,

Items Distribution from A/c Effect on basis Balance after distribution

From AAA A/c           $79,020                 -$79,020            0

From AEP                  $26,340                 $26,340             0

From Basis              $52,680                -$52,680     $79,020

($79,020 -$26,340 = $52,680 )

($210,720 - $79,020 - $52,680 = $79,020)

The AAA balance is reduced to zero.

His basis reduced by $131,700 and final balance is $79,020.

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