Zane, an individual, owns all of the outstanding common stock in XYZ Utilities Corporation. Zane purchased his XYZ stock seven (7) years ago and his basis is $8,000. Before the

Zane, an individual, owns all of the outstanding common stock in XYZ Utilities Corporation. Zane purchased his XYZ stock seven (7) years ago and his basis is $8,000.  Before the transactions listed below, XYZ has $25,000 of accumulated earnings and profits and no current earnings and profits.  Determine the tax consequences to Zane and XYZ in each of the following alternative situations: (a)  XYZ distributes inventory ($20,000 fair market value; $11,000 basis) to Zane. (b)  Same as (a) above, except that, before the distribution, XYZ had no accumulated earnings and profits.

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