Part 1 Hawk eye Company reports current E&P of $300,000 this year and accumulated E&P at the beginning of the year of $200,000. Hawk eye distributed $400,000 to its sole shareholder, Ray Kinsey, on December 31 of this year. Ray’s tax basis in his Hawk eye stock is $75,000.How much of the $400,000 distribution is treated as a dividend to Ray? What is Ray’s tax basis in his Hawk eye stock after the distribution? What is Hawkishness balance in accumulated E&P as of January 1 of next year? Part 2 If the distribution was a liquidating distribution, what would be the difference in treatment and tax basis? Note: Please explain and show computation.
