Pearlie, a sole shareholder, has a $15,000 stock basis and a $7,000 basis in a loan that she made to Lexus, a calendar year S Corporation with no AEP….

Pearlie, a sole shareholder, has a $15,000 stock basis and a $7,000 basis in a loan that she made to Lexus, a calendar year S Corporation with no AEP.  At the beginning of the tax year, the corporation’s AAA and OAA balances are zero. Ordinary income for the year is $20,000. Lexus also received $5,000 of tax-exempt interest income during the year. Cash of $50,000 is distributed to Pearlie on November 15. What are the tax implications of this distribution?