Question - Pardners, Inc., an accrual basis taxpayer, has two equal shareholders, Dean and Jerry. They each bought their shares five years ago for $100,000. The following transactions also occurred during the year:

a. Pardners had taxable income of $186,000.

b. Taxable income was reduced by a net operating loss carryover of $40,000.

c. It paid federal income taxes of $65,000.

d. It had meal and entertainment expenses of $ 8,000.

e. The company paid life insurance premiums on key employees of $15,000.

f. It received life insurance payments on key employees of $25,000.

g. The cash surrender value of the key man policies increased by $5,000 during the year.

h. The company sold a piece of equipment during the year for $150,000. The purchase price will be paid over three years, starting in 2014, at $50,000 per year. The company's tax basis in the equipment was $110,000.

i. The company sold a piece of land held for investment during the year and reported a capital gain of $105,000. The corporation also a capital loss carryforward of $10,000.

j. E & P depreciation exceeded MACRS depreciation by $14,000.

k. An election under § 179 was made in 2011 for $40,000 of assets.

l. Pardners made a distribution to Dean and Jerry of $150,000 each on August 4, 2013.

m. Dean sold his stock to Jerry on November 5, 2013 for $ 125,000.

n. Pardners had a deficit in accumulated E&P as of January 1, 2012 of $234,000.

1. Compute Pardners' current E & P prior to the distribution?

2. What are the tax consequences of the distribution to Dean and Jerry?

3. What was Dean's gain or loss on the sale of his stock?