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

Exercise 58

Blackhawk Company reports current E P of negative $300,000 and accumulated E P of negative $200,000.Blackhawk distributed $400,000 to its sole shareholder, Melanie Rushmore, on June 30, 2011.Melanie's tax basis in her Blackhawk stock is $75,000.a.How much of the $400,000 distribution is treated as a dividend to Melanie?
b.What is Melanie's tax basis in her Blackhawk stock after the distribution?
c.What is Blackhawk's balance in accumulated E P as of January 1, 2012?