Emma Is the Sole Shareholder in Pacific Corporation and Has

question 82

Essay

Emma is the sole shareholder in Pacific Corporation and has owned the stock for five years.The basis in her stock is $50,000.Pacific distributes $35,000 to Emma.Accumulated earnings and profits at the beginning of the year equal $25,000 and current earnings and profits equal $5,000.
Required:
a.What are the tax consequences of this information?
b.What are the tax consequences of this information if,instead of distributing $35,000 to Emma,Pacific distributes $100,000 to Emma?

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Definitions:

Provisional Patent

A legal document filed in the United States Patent and Trademark Office (USPTO), that allows an inventor to secure a filing date while preparing to submit a full patent application.

Prototype

An early sample, model, or release of a product built to test a concept or process and to be used as a thing to be replicated or learned from.

1 Year

A period of twelve consecutive months used as a basis for calculating time-related metrics.

Independent Contractor

An individual who provides goods or services to another entity under terms specified in a contract or within a verbal agreement, not considered an employee.