Kinney, inc., an electing s corporation, holds $5,000 of aep and $9,000 in aaa at the beginning of the calendar tax year. kinney has two shareholders, eric and maria, each of whom owns 500 shares of kinney's stock. kinney's taxable income is $6,000 for the year. kinney distributes $6,000 to each shareholder on february 1, and it distributes another $3,000 to each shareholder on september 1. how is eric taxed on the distribution?

(a) $500 dividend income.
(b) $1,000 dividend income.
(c) $1,500 dividend income.
(d) $3,000 dividend income.
(e) none of the above.

(C) $1,500 dividend income.

Explanation:

The total AAA available is $15000($10000+$5000(taxable income)).

The total distribution $18000(($6000×2)+($3000×2))

Here since available AAA is $15000 each get deduction of $7500($15000×500shares/1000shares).Hence $1500(i.e $6000+$3000-$7500) is taxable.

answeraccounts;

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.