PART 1: Nomad Corporation (a calendar year, accrual basis taxpayer) had the followingtransactions in 2021:Taxable Income$295,000Federal Income Tax Liability Paid69,300Tax-Exempt Interest Income3,000Excess of Capital Loss over Capital Gains7,000Section 179 Expense elected in 202115,000Dividends Received from Domestic Corporation (less than40,00020% owned)MACRS Depreciation deduction18,000Straight-line depreciation using ADS class lives10,000Compute Nomad's E & P for tax year 2021PART 2: On June 30th, Nomad Corporation distributes $100,000 to Jack and Jill, who each own50% of the corporation. At the beginning of the current year, Nomad corporation has a deficit inaccumulated E&P of $(53,000). Using the figure for current E&P that you calculated for NomadCorporation, determine the tax treatment of distribution for the shareholders. (assume eachshareholder has adequate basis in the corporation).

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Answered: me me Tax Liability Paid Interest…

Business

Accounting

me me Tax Liability Paid Interest Income

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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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

PART 1: Nomad Corporation (a calendar year, accrual basis taxpayer) had the following
transactions in 2021:
Taxable Income
$295,000
Federal Income Tax Liability Paid
69,300
Tax-Exempt Interest Income
3,000
Excess of Capital Loss over Capital Gains
7,000
Section 179 Expense elected in 2021
15,000
Dividends Received from Domestic Corporation (less than
40,000
20% owned)
MACRS Depreciation deduction
18,000
Straight-line depreciation using ADS class lives
10,000
Compute Nomad's E & P for tax year 2021
PART 2: On June 30th, Nomad Corporation distributes $100,000 to Jack and Jill, who each own
50% of the corporation. At the beginning of the current year, Nomad corporation has a deficit in
accumulated E&P of $(53,000). Using the figure for current E&P that you calculated for Nomad
Corporation, determine the tax treatment of distribution for the shareholders. (assume each
shareholder has adequate basis in the corporation).

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