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:

Behaviourally Anchored Rating Scales

A performance appraisal method that rates employees based on specific behaviors related to their job performance.

Rating Scales

Tools or instruments used to assign values to variables or responses, typically for the purpose of measurement or evaluation.

Performance Levels

Performance levels refer to the degrees or tiers of achievement or productivity of an individual, group, or system within a set framework or standards.

Performance Appraisal

The systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development.