Austin Corporation Reports Positive Current E&P of $200,000 and Negative

question 32

Essay

Austin Corporation reports positive current E&P of $200,000 and negative accumulated E&P of $300,000.Austin distributed $250,000 to its sole shareholder, Betsy Bevo, on December 31, year 1.Betsy's tax basis in her stock is $125,000.How much of the $250,000 distribution is treated as a dividend to Betsy and what is her tax basis in Austin stock after the distribution?

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Definitions:

Maintenance

The process of preserving equipment, machines, buildings, or systems through routine checkups, repairs, and replacements to ensure they remain in a safe and functional condition.

Redundant Part

A backup component or section in machinery, systems, or products, designed to take over in case the primary part fails.

Reliability

Reliability describes the ability of a system or component to perform its required functions under stated conditions for a specified period.

Parallel

An approach or system configuration where tasks or processes are run simultaneously, often to increase efficiency or throughput.