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:

Secretary of State

A senior official of the federal government, responsible for the foreign affairs of the country.

Welfare Benefits

Financial aid provided by the government to individuals or groups in need.

Upper-Middle-Class

A social group characterized by high income, education, and social status, typically above the middle class but below the upper class.

The Cosby Show

An American television sitcom starring Bill Cosby, focusing on the life of an African American family in Brooklyn, New York during the late 20th century.