General Accounting 5.7 Nicol Corporation has accumulated Earnings & Profits (E&P) of $6,500, but acurrent deficit of $2,500. If Noah Nelson, the sole shareholder, has a basis of$8,500 in his stock and receives a distribution of $15,000 at the beginning of theyear, his gross income equals:

Concept of Earnings & Profits (E&P):Earnings & Profits (E&P) is a tax accounting…

Answered: Nicol Corporation has accumulated…

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter19: Corporations: Distributions Not In Complete Liquidation

Section: Chapter Questions

Problem 1BCRQ

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His gross income equals
Blue Corporation has a deficit in accumulated E & P of $300,000 and has current E & P of $225,000. On July 1, Blue distributes $250,000 to its sole shareholder, Sam, who has a basis in his stock of $52,500. As a result of the distribution, Sam has: Oa. Dividend income of $52,500 and reduces his stock basis to zero. Ob. Dividend income of $225,000 and no adjustment to stock basis. Oc. No dividend income, reduces his stock basis to zero, and has a capital gain of $250,000. Od. Dividend income of $225,000 and reduces his stock basis to $27,500. Oe. None of these choices are correct.
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Dd.62.
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Nicol Corporation has accumulated Earnings & Profits (E&P) of $6,500, but a current deficit of $2,500. If Noah Nelson, the sole shareholder, has a basis of $8,500 in his stock and receives a distribution of $15,000 at the beginning of the year, his gross income equals: