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At the beginning of the current year, Xiaoyao Corporation (a calendar year taxpayer) has accumulated...

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Accounting

At the beginning of the current year, Xiaoyao Corporation (a calendar year taxpayer) has accumulated E&P of $10,000. During the year, the corporation incurs a $15,000 deficit in current E&P that accrues ratably. On July 1, Xiaoyao Corporation distributes $6,000 in cash to Ian, its sole shareholder. Ian has a $7,500 basis in the stock owned. Determine the amount of Ians (1) dividend income in the year of distribution and (2) Ians basis in the stock owned after distribution. (20 Points)

$12,500 and $4,000

$6,000 and $3,500

$0 and $7,500

$5,000 and $2,500

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