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Taxation: Classification of Chum Corporation Distributions

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Chum Corporation distributed $20,000 cash to George, its sole Class A common stockholder in May of the current year and it made a $20,000 cash distribution to Bennie its sole Class B common stockholder in December of the current year. The corporation has $15,000 in current earnings and profits for the year and $18,000 in accumulated earnings and profits. How will the corporation identify the distribution to George and Bennie?

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Solution Summary

The solution classity earnings of Chum Corporation in Class A & Class B stockholder.

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Answer:

Class A & Class B shares are usually preferred stock/shares

Preferred stock is paid a dividend prior to any distribution to common stockholders, and the dividend is ...

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