Wineseller Corporation is owned by Mortimer Smith, its sole shareholder.  Mortimer has a $20,000 basis in his Wineseller Corporation stock.  Mortimer is in the 37% tax bracket.  Wineseller Corporation is in the 21% tax bracket.  Wineseller Corporation has the following balances as of December 31, 2021. Accumulated Earnings and Profits (AEP) ($600,000) Current Earnings and Profits $  70,000 On December 31, 2021, Wineseller Corporation distributes $160,000 to Mortimer. What are the tax consequences to Mortimer from receiving this distribution from Wineseller Corporation?

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 49P
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Wineseller Corporation is owned by Mortimer Smith, its sole shareholder.  Mortimer has a $20,000 basis in his Wineseller Corporation stock.  Mortimer is in the 37% tax bracket.  Wineseller Corporation is in the 21% tax bracket. 

Wineseller Corporation has the following balances as of December 31, 2021.

  • Accumulated Earnings and Profits (AEP) ($600,000)
  • Current Earnings and Profits $  70,000

On December 31, 2021, Wineseller Corporation distributes $160,000 to Mortimer.

  1. What are the tax consequences to Mortimer from receiving this distribution from Wineseller Corporation?


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