Corporation M has $40,000 of current earnings and profits and $10,000 of accumulated earnings and profit. During the year Corporation M distributes $60,000 to is only shareholder – N. Before the distribution, N has basis in their stock of $100,000. What amount of capital gain income will N recognize related to this distribution?

$40,000

Explanation:

Calculation to determine What amount of capital gain income will N recognize related to this distribution

Using this formula

N Capital gain income=N stock basis- M distribution

Let plug in the formula

N Capital gain income=$100,000-$60,000

N Capital gain income=$40,000

Therefore The amount of capital gain income that N will recognize related to this distribution is $40,000

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