At the end of the year, before distributions, Bombay (an Scorporation) has an accumulated adjustments account balance of$15,600 and accumulated E&P of $20,750 from a previous year asa C corporation. During the year, Nicolette (a 40 percentshareholder) received a $20,750 distribution (the remainingshareholders received $31,125 in distributions). (Assume her stockbasis is $41,500 after considering her share of Bombay’s income forthe year but before considering the effects of the distribution.)Required: What is the amount and character of gain Nicolette mustrecognize from the distribution? What is her basis in her Bombaystock at the end of the year?
