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82 - Leo will have a taxable dividend of $10,000 and a...

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Leo owns all the stock in a newly-formed corporation. During 2007 the first year of operation, the corporation realized current earnings and profits of $10,000. Leo received a $12,000 distribution from the corporation. How much, if any, of the distribution is taxable to Leo. Why? Answer:
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Unformatted text preview: Leo will have a taxable dividend of $10,000 and a non-taxable return of capital of $2,000. This assumes Leo has some cost basis in his stock. Distributions in excess of earnings and profits are non-taxable and reduce the recipient’s basis in the stock of the corporation....
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