70 points 1 Lanco Corporation, an accrual-method corporation, reported taxable income of $2,350,000 this year. Included in the computation of taxable income were the following items: • MACRS depreciation of $272,500. Depreciation for earnings and profits purposes is $171,000. ⚫ A net capital loss carryover of $13,400 from last year. ■ A net operating loss carryover of $26,000 from last year. • $64,550 capital gain from the distribution of land to the company's sole shareholder (see below). Not included in the computation of taxable income were the following items: • Tax-exempt income of $8,500. ⚫ Life insurance proceeds of $320,000. Excess current-year charitable contribution of $3,700 (to be carried over to next year). • Tax-deferred gain of $29,100 on a like-kind exchange. ⚫ Nondeductible life insurance premium of $4,800. ⚫ Nondeductible interest expense of $2,700 on a loan used to buy tax-exempt bonds. Lanco's accumulated E&P at the beginning of the year was $3,010,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi: ⚫ June 30: $58,500. ⚫ September 30: Parcel of land with a fair market value of $78,250. Lanco's adjusted tax basis in the land was $13,700. Luigi assumed an existing mortgage on the property of $17,000. Required: a. Compute Lanco's current E&P. b. Compute the amount of dividend income reported by Luigi this year because of the distributions. c. Compute Lanco's accumulated E&P at the beginning of next year. Answer is not complete. a. Current E&P b. Dividend income $ 119,750 c. Accumulated E&P, beginning of next year
70 points 1 Lanco Corporation, an accrual-method corporation, reported taxable income of $2,350,000 this year. Included in the computation of taxable income were the following items: • MACRS depreciation of $272,500. Depreciation for earnings and profits purposes is $171,000. ⚫ A net capital loss carryover of $13,400 from last year. ■ A net operating loss carryover of $26,000 from last year. • $64,550 capital gain from the distribution of land to the company's sole shareholder (see below). Not included in the computation of taxable income were the following items: • Tax-exempt income of $8,500. ⚫ Life insurance proceeds of $320,000. Excess current-year charitable contribution of $3,700 (to be carried over to next year). • Tax-deferred gain of $29,100 on a like-kind exchange. ⚫ Nondeductible life insurance premium of $4,800. ⚫ Nondeductible interest expense of $2,700 on a loan used to buy tax-exempt bonds. Lanco's accumulated E&P at the beginning of the year was $3,010,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi: ⚫ June 30: $58,500. ⚫ September 30: Parcel of land with a fair market value of $78,250. Lanco's adjusted tax basis in the land was $13,700. Luigi assumed an existing mortgage on the property of $17,000. Required: a. Compute Lanco's current E&P. b. Compute the amount of dividend income reported by Luigi this year because of the distributions. c. Compute Lanco's accumulated E&P at the beginning of next year. Answer is not complete. a. Current E&P b. Dividend income $ 119,750 c. Accumulated E&P, beginning of next year
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
None
Transcribed Image Text:70
points
1
Lanco Corporation, an accrual-method corporation, reported taxable income of $2,350,000 this year. Included in the computation of
taxable income were the following items:
• MACRS depreciation of $272,500. Depreciation for earnings and profits purposes is $171,000.
⚫ A net capital loss carryover of $13,400 from last year.
■ A net operating loss carryover of $26,000 from last year.
• $64,550 capital gain from the distribution of land to the company's sole shareholder (see below).
Not included in the computation of taxable income were the following items:
• Tax-exempt income of $8,500.
⚫ Life insurance proceeds of $320,000.
Excess current-year charitable contribution of $3,700 (to be carried over to next year).
• Tax-deferred gain of $29,100 on a like-kind exchange.
⚫ Nondeductible life insurance premium of $4,800.
⚫ Nondeductible interest expense of $2,700 on a loan used to buy tax-exempt bonds.
Lanco's accumulated E&P at the beginning of the year was $3,010,000. During the year, Lanco made the following distributions to its
sole shareholder, Luigi:
⚫ June 30: $58,500.
⚫ September 30: Parcel of land with a fair market value of $78,250. Lanco's adjusted tax basis in the land was $13,700. Luigi
assumed an existing mortgage on the property of $17,000.
Required:
a. Compute Lanco's current E&P.
b. Compute the amount of dividend income reported by Luigi this year because of the distributions.
c. Compute Lanco's accumulated E&P at the beginning of next year.
Answer is not complete.
a. Current E&P
b. Dividend income
$
119,750
c. Accumulated E&P, beginning of next year
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education