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    Tax Treatment of Distributions

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    MikeCO made the following distributions during the year:
    *5/1/x1 $60,000
    *9/1/x1 40,000

    Determined the tax treatment of each distribution under each of the following independent circumstances:

    Accum E&P Curr E&P
    a)$10,000 $50,000
    b)(70,000) 50,000
    c) 95,000 (18,250)

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    Solution Preview

    Circumstance A
    *5/1/x1 $60,000 - tax as dividends
    *9/1/x1 40,000 - return of capital, hence non taxable. However, if it has a capital gains component then it will be taxed depending on whether the capital gains are short or long ...

    Solution Summary

    This solution provides calculations and and justifications on the tax treatment of each distribution circumstance.