Black Corporation and Tom each own 50% of Tan Corporation's common stock. On January 1, Tan has a deficit in accumulated E & P is $90,000. During the year, Tan makes cash distributions of $40,000 each to Black and Tom. 1. How are the two shareholders taxed on the distribution?
2. What is Tan Corporation's accumulated E & P at the end of the year?

The common stock and debt of northern sludge are valued at $65 million and $35 million, respectively. investors currently require a return of 15.9% on the common stock and a return of 7.8% on the debt. if northern sludge issues an additional $14 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? assume that the change in capital structure does not affect the interest rate on northern’s debt and that there are no taxes.