X Corp. is a calendar year taxpayer. Seb owns all

X Corp. is a calendar year taxpayer. Seb owns all the stock of X Corp, which has a basis of $15,000. On May 1 of the current year, X Corp. distributes $40,000 cash to Seb. On August 1 of the current year, X Corp distributes an additional $60,000 cash to Seb.

Instructions:

Determine Seb’s tax treatment of each the IRC Sec. 301 non-liquidating distributions received under the following independent scenarios. Assume that the May 1 and August 1 distributions to Seb are the only distributions made by X Corp. during the current year. Note: “E&P” is an abbreviation for earnings and profits. Use the space provided below each scenario for supporting calculations.

1. a.) X’s Current E&P: $50,000; X’s Accumulated E&P: $30,000
3. b.) X’s Current E&P: $(30,000); X’s Accumulated E&P: $39,000 (Assume that the current deficit is not earmarked to a particular period during the year.)