want correct answer with details Bristlebird Corporation (E&P of $700,000) has 3,000 shares of common stockoutstanding. Juan owns 1,500 shares and his wife, Roberta, owns 1,500shares. Juan and Roberta each have a basis of $90,000 in their Bristlebirdstock. In the current year, Bristlebird Corp. redeems 1,000 shares from Juanfor $250,000. With respect to the distribution in redemption of the Bristlebirdstock:a. Juan has a dividend income of $250,000.b. Juan has a dividend income of $190,000.c. Juan has a capital gain of $250,000.d. Juan has a capital gain of $190,000.e. None of the above.

Key Information: Number of shares outstanding: 3,000 sharesShares owned by Juan: 1,500 sharesShares…

Answered: Bristlebird Corporation (E&P of…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter13: Corporations: Earning & Profits And Distributions

Section: Chapter Questions

Problem 2CE

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Magenta Corporation has 1,000 shares of stock outstanding. Julie owns 400 of these shares, and unrelated individuals own the remaining 600 shares. Magenta redeems 100 of Julie's shares for $200,000. In the year of the redemption, Magenta has $230,000 of paid-in capital and $330,000 of E&P. Requirements a. How does the redemption affect Magenta's E&P balance if the redemption qualifies for sale treatment? b. How does the redemption affect Magenta's E&P balance if the redemption does not qualify for sale treatment? Requirements a and b. How does the redemption affect Magenta's E&P balance if the redemption qualifies for sale treatment and if the redemption does not qualify for sale treatement? (If an input field is not used, leave the input field empty. Do not select a label or enter a zero.) Remaining Redemption qualifies for sale treatment Redemption does not qualify for sale treatment Effect on E&P By this amount amount (if Treatment of remaining applicable) amount
At the beginning of the current year ACME, Inc. has two shareholders: Shareholder 1 owns 60% of the stock and Shareholder 2 40%. Shareholder 1 has a basis in their stock of $200,000 and Shareholder 2 has basis of $150,000. The shareholders are not related to one another. ACME’s Current E&P for the year is $500,000. During the year ACME makes the following stock redemptions: Redemption 1: Purchases 10% of each of the shareholders shares for a total of $100,000 (split equally). Shareholder 1’s basis in the stock sold was $20,000 and shareholder 2 is $10,000. Redemption 2: Purchase all of shareholder 2’s remaining shares for $150,000. Required: How much does shareholder 2 include in their income for the year as a result of the two redemptions?
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EG Corporation redeemed 200 shares of stock from one of its shareholders in exchange for $210,000. The redemption represented 20% of the corporation’s outstanding stock. The redemption was treated as an exchange by the shareholder. EG’s total E&P at the time of the distribution was $2,000,000. By what amount does EG reduce its total E&P as a result of the redemption? EG Corporation redeemed 200 shares of stock from one of its shareholders in exchange for $210,000. The redemption represented 20% of the corporation’s outstanding stock. The redemption was treated as an exchange by the shareholder. EG’s total E&P at the time of the distribution was $600,000. By what amount does EG reduce its total E&P as a result of the redemption?
Caramel Corporation has 5,000 shares of stock outstanding. In a qualifying stock redemption, Caramel distributes $145,000 in exchange for 1,000 of its shares. At the time of the redemption, Caramel has paid-in capital of $800,000 and E & P of $300,000. Calculate the reduction to Caramel’s E & P as a result of the distribution.
Crane Corporation has 2,000 shares of stock outstanding. It redeems 500 shares for $370,000 when it has paid-in capital of $300,000 and E & P of $1,200,000. The redemption qualifies for sale or exchange treatment for the shareholder. Crane incurred $13,000 of accounting and legal fees in connection with the redemption transaction and $18,500 of interest expense on debt incurred to finance the redemption. What is the effect of the distribution on Crane Corporation’s E & P? Also, what is the proper tax treatment of the redemption expenditures?
Steve Company owns shares of common stock in Dave Corporation. As of November 1, 2012, the stock investment had a book value of $600,000. On November 30th, Steve Company decided to issue a property dividend to stockholders, to distribute the investment securities, which have a market value of $760,000. Steve Company will distribute the securities on December 15th to all stockholders of record as of December 1st. Create the required journal entries for this dividend issuance and payment.
During year 4, Wall Co. purchased 2,000 shares of Hemp Corp. common stock for $31,500 as a short-term investment. The investment was appropriately classified as a trading security. The market value of this investment was $29,500 at December 31, year 4. Wall sold all of the Hemp common stock for $14 per share on January 15, year 5, incurring $1,400 in brokerage commissions and taxes. On the sale, Wall should report a realized loss of: a. $1,500 b. $2,900 c. $3,500 d. $4,900
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On September 15, 2018, Alonso Ltd, sells 62 common shares of Bandi Corp.which were being held as a trading investment (accounted for using the FtRLl model). The shares were acquired six months ago at S145 a share. Alonso s thelshares for $52 a share. The amount that was recorded as a realized gain or loss was
Blue Spruce Corporation purchased 300 common shares of Burke Inc. for $22,830 and accounted for them using FV-OCI. During the year, Burke paid a cash dividend of $3.45 per share. At year end, Burke shares had a fair value of $72.50 per share. (a) Prepare Blue Spruce's journal entry to record the purchase of the investment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles and Explanation Debit Credit

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