Alberto owns 25 percent of Sycamore, an S corporation. At th…
Alberto owns 25 percent of Sycamore, an S corporation. At the beginning of the year, Alberto’s basis in his stock was $30,000, his share of Sycamore’s accumulated adjustments account (AAA) was $25,000, and his share of Sycamore’s earnings and profits from prior C corporation years (accumulated E&P) was $15,000. Then, during the year, Alberto was allocated $12,500 of ordinary income and Sycamore made a nonliquidating distribution to Alberto of $50,000. (1) How much of the distribution is taxable to Alberto as a dividend? (2) What is Alberto’s basis in his Sycamore stock after the distribution?