Houghton Company Reports a Deficit in Current E&P of ($500,000)and

Essay

Houghton Company reports a deficit in current E&P of ($500,000)and a deficit in accumulated E&P of ($800,000). Houghton distributed $100,000 to its sole shareholder, Blossom Applegate, on December 31, 20X3. Blossom's tax basis in her Houghton stock is $50,000. What is the tax treatment of the distribution to Blossom, and what is her tax basis in Houghton stock after the distribution?