Tia Receives a $15,000 Cash Distribution from Main Corporation in March

question 55

Essay

Tia receives a $15,000 cash distribution from Main Corporation in March of the current year. Main has $6,000 of accumulated E&P at the beginning of the year and $12,000 of current E&P. Main also distributed $15,000 in cash to Betty, who purchased all 300 shares of Main stock from Tia in June of the current year. What tax issues should be considered with respect to the distributions paid to Tia and Betty?

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Definitions:

AGI

The total income minus allowable deductions, serving as a crucial metric for determining taxable income and eligibility for various tax benefits.

IRA

Individual Retirement Account, a tax-advantaged investing tool for individuals to earmark funds for retirement savings.

Contributed

To provide or donate something of value, often used in the context of contributing money to a retirement account or charity.

Child Tax Credit

A tax credit offered to taxpayers for each qualifying child, aimed at reducing a taxpayer's liability on a dollar-for-dollar basis.