Response to the following :
1. Accumulated Adjustments Account
What is the accumulated adjustments account and what purpose does it serve?
2. Shareholder's Basis in S Corporation Stock
An S corporation (with a $3,000 balance in its AAA and no E&P) distributes $9,000 to one of its shareholders. The shareholder's basis in his shares of stock was $5,000 prior to the distribution.
a. Is the shareholder taxed on the distribution, and if so, how?
b. Compute the shareholder's basis in the S stock after the distribution.