At the Beginning of the Current Year, Paul and John

question 17

Essay

At the beginning of the current year, Paul and John each own 50% of Apple Corporation. In July, Paul sold his stock to Sarah for $110,000. At the beginning of the year, Apple Corporation had accumulated E & P of $200,000 and its current E & P is $250,000 (prior to any distributions). Apple distributed $260,000 on March 1 ($130,000 to Paul and $130,000 to John) and distributed another $260,000 on October 1 ($130,000 to Sarah and $130,000 to John). What are the tax implications of the $130,000 distribution to Sarah?

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Definitions:

Ulnar Artery

The artery that runs along the side of the forearm that is closest to the body when in an anatomical position, supplying blood to the forearm and hand.

Major Arterial Vessel

A major arterial vessel is a large artery that carries oxygen-rich blood away from the heart to various parts of the body.

Aorta

The largest artery in the body, originating from the left ventricle of the heart and extending down to the abdomen, distributing oxygenated blood to the circulatory system.

Ligamentum Arteriosum

A small fibrous band that connects the pulmonary artery to the aorta, a remnant of the fetal circulation.