Lesson 5A-In Class Exercise 

Pink Corporation is a calendar year taxpayer.  Pete owns 1/3 of the stock (100 shares).  His basis for his stock is $25,000.  Cheryl owns 2/3 of the stock (200 shares).  Her basis for her stock is $40,000.  

On June 10 of the current year, Pink distributes $120,000 (40,000 to Pete and 80,000 to Cheryl).  Determine the tax consequences to Pete and Cheryl in each of the following independent situations:

A)	Current E&P of $60,000; Accumulated E&P of $100,000.

B)	Current E&P of $36,000; Accumulated E&P of $30,000.