Exercise 19-30 (Algorithmic) (LO. 8) During the current year, Gnatcatcher, Inc., (E & P of $1,300,000) distributed $575,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 32% tax bracket, and each had a $143,750 basis in the redeemed stock. Assume taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%. If required, round your answers to nearest dollar. a. Assume that the distribution to Brandi is a qualifying stock redemption. The distribution is taxed as a sale or exchange Feedback ►Check My Work ✔and Brandi's tax liability is $ b. Assume that the distribution to Yuen is a nonqualified stock redemption. The distribution is taxed a dividend ✔and Yuen's tax liability is $

Exercise 19-30 (Algorithmic) (LO. 8) During the current year, Gnatcatcher, Inc., (E & P of $1,300,000) distributed $575,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 32% tax bracket, and each had a $143,750 basis in the redeemed stock. Assume taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%. If required, round your answers to nearest dollar. a. Assume that the distribution to Brandi is a qualifying stock redemption. The distribution is taxed as a sale or exchange Feedback ►Check My Work ✔and Brandi's tax liability is $ b. Assume that the distribution to Yuen is a nonqualified stock redemption. The distribution is taxed a dividend ✔and Yuen's tax liability is $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2. T corporation (e & p $800,000) has 1,000 shares of stock outstanding. The shares are owned as followed: james 600 shares; stephanie (james sister) 300 shares; luke (james son) 100 shares. T corporation owns land (basis of $300,000, fmv of $260,000) that it purchased as an investment 10 years ago. James had a basis of $275,000 in his shares. What are the tax consequences for both t cororation and james if the distribution is: a qualified stock redemption? b. liquidating distribution?
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Sharon Slotten purchased shares in ATCO Ltd. during the current year as follows: Jan. 1: 200 shares for $25 per share April 2: 300 shares for $30 per share July 1: 100 shares sold for $45 per share Sept. 8: 500 shares for $24 per share On December 22, of the current year Sharon sells 200 ATCO Ltd. shares for $35 per share and pays $100 in sales commission. Required: Calculate the taxable capital gain or loss included in Sharon's NET INCOME under paragraph 3(b) of the Income Tax Act. Solution: Date No. of shares Cost per share Cost in Pool Jan.1 200 $ 25.00 $ 5,000 Apr.2 300 $ 30.00 $ 9,000 Subtotal 01-Jul 100 $ 45.00 $ 4,500 Sept.8 Total Calculation of Capital Gain: Proceeds of disposition Selling costs Adjusted cost base Capital Gain (loss) Capital Gains reserve Capital Gain Inclusion rate Taxable capital gain Total 01-Jul Dec.22 $ 200 $
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#13 YOO-YOO Company purchased 200 of the 1000 outstanding shares of WEBUL Company's common stock for $710000 on January 2, 2021. In 2021, WEBUL Company declared dividends of $155000 and reported earnings for the year of $510000.If YOO-YOO Company used the fair value method of accounting for its investment in WEBUL Company, its Equity Investments (WEBUL) account on December 31, 2021, should be $812000. $710000. $679000. $781000.
subject:accounting
Show your work On January 1 of the current year, Rhondell Corporation has accumulated E & P of $174,000. Current E & P for the year is $522,000, earned evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $278,400 ($139,200 to Elizabeth and $139,200 to Jonathan) on April 30 and a total of $487,200 ($243,600 to Jonathan and $243,600 Marshall) on December 31. Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in their stock for any amount that is treated as return of capital.
During the year, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. At the end of last year, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct? a. Nutt recognizes a $1,000 LTCG. b. Nutt's stock basis is $2,000. c. Nutt's ordinary income is $15,000. d. Nutt's tax-free return of capital is $11,000.'
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
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Show your work Cerulean Corporation has two equal shareholders, Marco and Avery. Marco acquired his Cerulean stock three years ago by transferring property worth $700,000, basis of $300,000, for 70 shares of the stock. Avery acquired 70 shares in Cerulean Corporation two years ago by transferring property worth $660,000, basis of $110,000. Cerulean Corporation’s accumulated E & P as of January 1 of the current year is $350,000. On March 1 of the current year, the corporation distributed to Marco property worth $120,000, basis to Cerulean of $50,000. It distributed cash of $220,000 to Avery. On July 1 of the current year, Avery sold her stock to Harpreet for $820,000. On December 1 of the current year, Cerulean distributed cash of $90,000 each to Harpreet and Marco. What are the tax issues?
Cerulean Corporation has two equal shareholders, Marco and Avery. Marco acquired his Cerulean stock three years ago by transferring property worth $700,000 (basis of $300,000) for 70 shares of the stock. Avery acquired 70 shares in Cerulean Corporation two years ago by transferring property worth $660,000 (basis of $110,000). Cerulean Corporation's accumulated E & P as of January 1 (current year) is $350,000. On March 1 of the current year, the corporation distributed to Marco property that is worth $120,000, with a basis to Cerulean of $50,000. It distributed cash of $220,000 to Avery. On July 1 of the current year, Avery sold her stock to Harpreet for $820,000. On December 1 of the current year, Cerulean distributed cash of $90,000 each to Harpreet and Marco. Regarding this tax situation, classify each of the following as "Yes" a relevant tax issue or "No" not a tax issue. What basis do Marco and Avery have in their stock in Cerulean Corporation after their initial transfers for…