At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $19,800 and accumulated E&P of $26,000 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder) received a $26,000. What is the amount and character of gain Nicolette must recognize from the distribution?

SWFT Comprehensive Vol 2020
43rd Edition
ISBN:9780357391723
Author:Maloney
Publisher:Maloney
Chapter19: Corporations: Distributions Not In Complete Liquidation
Section: Chapter Questions
Problem 1BCRQ
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At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $19,800 and accumulated E&P of $26,000 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder) received a $26,000.

What is the amount and character of gain Nicolette must recognize from the distribution?

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