McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 22

Jayhawk Company reports current E P of $300,000 and accumulated E P of negative $200,000. Jayhawk distributed $400,000 to its sole shareholder, Christine Rock, on December 31, 2011. Christine's tax basis in her Jayhawk stock is $75,000.
a. How much of the $400,000 distribution is treated as a dividend to Christine
b. What is Christine's tax basis in her Jayhawk stock after the distribution
c. What is Jayhawk's balance in accumulated E P as of January 1, 2012