Shareholders Albert and Baker each own 50 percent of the stock in an corporation. As of January 1, 2011, each shareholder had a basis in his stock of $50,000, and on that date the S corporation had accumulated earnings and profit of $-0-. The corporation's financial income statement for the calendar year 2011, is as follows:
S corporation Income Statement
For the year ended December 31, 2011
Gross Sales $500,000
Cost of goods Sold 400,000
Gross Profit $100,000
Other Income:
Interest on tax-exempt bonds $10,000
Dividends 2,000
Interest (bank accounts) 3,000
Long-term capital gain 50,000
Short-term capital loss ( 10,000) 55,000
Total Income (including nontaxable) $155,000
Expenses:
Salary(paid to Albert) $25,000
Business expenses 30,000
Charitable contributions 5,000
Interest (carrying inventory) 4,000 64,000
Net income $91,000
During the year corporation distributes $50,000 to each shareholder.
What are the tax ramifications (IRS only) of the distribution made by the S corporation to Albert during 2011?