11) Crossroads Corporation distributes $60,000 to its sole shareholder Harley. Crossroads has earnings and profits of $55,000 and Harley’s basis in her stock is $20,000. After the distribution, Harley’s basis is A) $5,000. B) $15,000. C) $20,000. D) $60,000. Answer: B Explanation: B) $55,000 of the distribution reduces E&P to $0, and $5,000 is a reduction in the basis of Harley’s stock.
Can you please break this down for me? Thanks.