Distribution of AAA Clause Samples

Distribution of AAA. Pursuant to para- graph (b)(2)(i) of this section, the por- tion of the distribution that is sourced from AAA is equal to the lesser of: The product of the qualified distribution and the AAA ratio ($200 × 0.5, or $100), and X’s AAA immediately before the qualified distribution ($50). Therefore, $50 is sourced from AAA. Pursuant to paragraph (b)(2)(ii) of this section, after the distribution, X’s AAA is re- duced by $50 to $0. Pursuant to para- graph (b)(2)(iii) of this section, A must determine its basis as of December 18, 2019, in order to determine the con- sequences of receiving the $50 AAA dis- tribution. Because the non-qualified distribution on November 9, 2019, which precedes the December 18, 2019 quali- fied distribution, could have the effect of reducing A’s basis, any effect on A’s basis from that non-qualified distribu- tion must be analyzed prior to deter- mining the effect of the December 18, 2019 distribution of AAA on A’s basis. See paragraphs (d)(5)(ii)(D)(3) and (4) of this section. Pursuant to paragraph (a)(2)(vii) of this section, X’s ETSC pe- riod ends because X’s AAA balance is zero following the December 18, 2019 distribution.

Distribution of AAA. Pursuant to paragraph (b)(2)(i) of this section, the portion of the distribution that is sourced from AAA is equal to the lesser of: The product of the qualified dis- tribution and the AAA ratio ($40 × 1, or $40), and X’s AAA immediately before the qualified distribution ($25) (see paragraph (d)(4)(ii)(B)(4)(iii) of this sec- tion). Therefore, $25 is sourced from AAA. Pursuant to paragraph (b)(2)(ii) of this section, after the distribution, X’s AAA is reduced by $25 to $0. Pursu- ant to paragraph (b)(2)(iii) of this sec- tion, A’s basis in its X stock is reduced by $25 to $400.