1. Ciabatta Corporation made a cash distribution on December 31 of $90,000 each to Giselle (owns 50%) andFrench Corp (owns 50%). Giselle's stock basis in Ciabatta is $50,000 and French Corp's stock basis in Ciabatta is$15,000. What is the tax consequence to both Giselle and French Corp on the distribution in each independentscenario?a. Ciabatta has positive CEP of $66,000 and positive AEP of $36,000b. Ciabatta has negative CEP of $10,000 and positive AEP of $96,000c. Ciabatta has positive CEP of $44,000 and negative AEP of $10,000bu Eric

If CEP is => Amount of distribution then it is a taxable dividend to shareholder then whether AEP…

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ns 50%). C s the tax ce

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

Filing Federal Income Tax Return

A tax is the amount of money paid to the government on the revenue earned by the individual or business organization. It acts as an income for the government and an expense for the individual or business organization. There are different regulations regarding filing an income tax return in other countries.

Question

1. Ciabatta Corporation made a cash distribution on December 31 of $90,000 each to Giselle (owns 50%) and
French Corp (owns 50%). Giselle's stock basis in Ciabatta is $50,000 and French Corp's stock basis in Ciabatta is
$15,000. What is the tax consequence to both Giselle and French Corp on the distribution in each independent
scenario?
a. Ciabatta has positive CEP of $66,000 and positive AEP of $36,000
b. Ciabatta has negative CEP of $10,000 and positive AEP of $96,000
c. Ciabatta has positive CEP of $44,000 and negative AEP of $10,000
bu Eric

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