At the beginning of the current Year ("Year 1"), C Corporation ("C") had two shareholders, A and B,  and accumulated E&P of $10,000. A's adjusted basis in his shares of C stock was $200 and B's adjusted basis in her shares of C stock was $3,000.  During the current Year C had a capital gain of $4,000 on July 1, Year 1, but had no other income or deductions.  C distributed $4,000 cash to each of its two shareholder's, A and B, on March 1, Year 1.  On October 1 of Year 1, B sold her shares in C to D for $8,000.  On December 5, Year 1, C distributed $4,000 cash to each of A and D. Question. a. What dividend income does A recognize, if any, during Year 1?  (Write just the numerical value i.e. $50) b. Does A recognize any income other than dividend income?  (If no write $0.  If yes write how but just the number (i.e. $50)) c.  What is X' accumulated E&P at the beginning of Year 2?  (Write just the numerical value i.e. $50)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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At the beginning of the current Year ("Year 1"), C Corporation ("C") had two shareholders, A and B,  and accumulated E&P of $10,000. A's adjusted basis in his shares of C stock was $200 and B's adjusted basis in her shares of C stock was $3,000.  During the current Year C had a capital gain of $4,000 on July 1, Year 1, but had no other income or deductions.  C distributed $4,000 cash to each of its two shareholder's, A and B, on March 1, Year 1.  On October 1 of Year 1, B sold her shares in C to D for $8,000.  On December 5, Year 1, C distributed $4,000 cash to each of A and D.

Question.

a. What dividend income does A recognize, if any, during Year 1?  (Write just the numerical value i.e. $50)

b. Does A recognize any income other than dividend income?  (If no write $0.  If yes write how but just the number (i.e. $50))

c.  What is X' accumulated E&P at the beginning of Year 2?  (Write just the numerical value i.e. $50)

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