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:

Communication

The process of transferring information, meanings, and understanding from one entity or group to another through the use of mutually understood signs and semiotic rules.

Schizophrenia

A long-term, serious mental illness marked by altered thoughts, feelings, communication, self-identity, and actions.

Psychosis

A mental disorder characterized by a disconnection from reality, which may involve delusions, hallucinations, incoherent speech, and disorganized behavior.

Schizophrenogenic Mother

A type of mother—supposedly cold, domineering, and uninterested in the needs of her children—who was once thought to cause schizophrenia in her child.