At the start of the current year, Blue Corporation (a calendar year taxpayer) has accumulated E & P of $100,000. Blue's current E & P is $60,000, and at the end of the year, it distributes $200,000 ($100,000 each) to its equal shareholders, Pam and Jon. Pam's stock basis is $11,000, Jon's stock basis is $26,000. How is the distribution treated for tax purposes?

Pam and Jon's dividend income = $80,000 each

[ ($100000 Accumulated E&P + $60000 current E&P ) / 2] = $80,000

Statement of distribution for shareholders for tax purpose

                                            Pam           Jon

Total distribution            $100,000    $100,000

Less: Dividend income   $80,000     $80,000

                                        $20,000    $20,000

Less: Stock basis            $11,000       $26,000

Capital gain                     $9,000           $0

Therefore, Pam has a taxable gain of $9000 which reduces the stock basis to $0, whereas Jon has not any taxable gain but the stock basis has reduced to $6000 [$26000 - $20000]

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.