Anna converted Frozen Corporation from a C-corporation to an S-corporation in 2014 and is the sole shareholder in the corporation. As of the beginning of 2018, Anna has a $25,000 stock basis and $15,000 debt basis and Frozen Corporation has $6,000 in Accumulated Earnings and Profits and $12,000 in AAA. Assume that Subchapter S net income for 2018 is 8,000. Frozen Corporation also has a $2,000 long-term capital loss, $3,000 in tax-exempt income. Frozen made $45,000 in distributions during 2018.
Please compute Anna’s stock basis, debt basis and Frozen’s AAA as of the end of 2018. Also, please indicate how much of the 45,000 is tax as dividend, nontaxable return of capital, and capital gain.
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