At the end of 2020, Robin Corp. distributed $450,000 cash to its sole shareholder, Robyn. Robyn’s stock basis prior to the distribution was $100,000. - What amount of the distribution to Robyn is treated as a dividend? - At the beginning of 2021, what will be the amount of Robin Corp.’s accumulated E&P?
At the end of 2020, Robin Corp. distributed $450,000 cash to its sole shareholder, Robyn. Robyn’s stock basis prior to the distribution was $100,000. - What amount of the distribution to Robyn is treated as a dividend? - At the beginning of 2021, what will be the amount of Robin Corp.’s accumulated E&P?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Robin Corp. had the following in 2020:
| Taxable Income: | $330,000 |
| Federal income tax: | $69,300 |
| Interest on state gov’t (muni) bond: | $5,000 |
| Interest on corporate bond: | $10,000 |
| Meals expense (total): | $3,000 |
| Key person life insurance premiums: | $3,500 |
| Key person life insurance proceeds: | $130,000 |
| Ordinary & necessary business expenses: | $250,000 |
| Dividends (from a less-than-20%-owned US corp.; hint: make sure to include the 50% DRD in your E&P calculations): | $35,000 |
What is Robin Corp.’s current E&P? Assume that there is no cash surrender value on the life insurance policy.
Ans: 425,700
Q1.
Same facts as previous question (use the current E&P from the previous question). Robin Corp. had the following in 2020:
In addition to the current year E&P, Robin Corp. had accumulated E&P of $50,000.
At the end of 2020, Robin Corp. distributed $450,000 cash to its sole shareholder, Robyn. Robyn’s stock basis prior to the distribution was $100,000.
- What amount of the distribution to Robyn is treated as a dividend?
- At the beginning of 2021, what will be the amount of Robin Corp.’s accumulated E&P?
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