On January 1 of the current year, Rhondell Corporation has accumulated E & P of $162,000. Current E & P for the year is $486,000, 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 $259,200 ($129,600 to Elizabeth and $129,600 to Jonathan) on April 30 and a total of $453,600 ($226,800 to Jonathan and $226,800 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. If an amount is zero, enter "0". If required, round any division to two decimal places and use in subsequent computations. Round final answers to the nearest dollar. April 30 distribution of $259,200 December 31 distribution of $453,600 From Current E & P From Accumulated E & P Treated as Return of Capital x

On January 1 of the current year, Rhondell Corporation has accumulated E & P of $162,000. Current E & P for the year is $486,000, 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 $259,200 ($129,600 to Elizabeth and $129,600 to Jonathan) on April 30 and a total of $453,600 ($226,800 to Jonathan and $226,800 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. If an amount is zero, enter "0". If required, round any division to two decimal places and use in subsequent computations. Round final answers to the nearest dollar. April 30 distribution of $259,200 December 31 distribution of $453,600 From Current E & P From Accumulated E & P Treated as Return of Capital x

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

1
Mr. Boyd and Ms. Tuck decide to form a new corporation named BT Inc. Mr. Boyd transfers $20,000 cash, equipment (FMV $40,000; adjusted tax basis $41,500), and business inventory ($20,000 FMV; adjusted tax basis $12,000), and Ms. Tuck drafts the legal documents and designs the accounting system for B, valued at $20,000. BT issues 1,000 shares of common stock to its two shareholders. 2. Compute Ms. Tuck's realized and recognized gain on her exchange of property for stock, and determine her tax basis in her BT common share
Wineseller Corporation is owned by Mortimer Smith, its sole shareholder. Mortimer has a $20,000 basis in his Wineseller Corporation stock. Mortimer is in the 37% tax bracket. Wineseller Corporation is in the 21% tax bracket. Wineseller Corporation has the following balances as of December 31, 2021. Accumulated Earnings and Profits (AEP) ($600,000) Current Earnings and Profits $ 70,000 On December 31, 2021, Wineseller Corporation distributes $160,000 to Mortimer. What are the tax consequences to Mortimer from receiving this distribution from Wineseller Corporation?
Indigo Corporation has $15,000 AEP and CEP of $30,000. Renee, the sole shareholder of Indigo Corporation, sold all her stock of Indigo to Chad on July 1 for $180,000. Renee's stock basis at the beginning of the year was $125,000. Indigo made a $60,000 cash distribution to Renee immediately before the sale and Chad received a $140,000 cash distribution from Indigo on November 1. Which of the following statements is correct? Select one: a. Renee recognizes a $91,000 gain on the sale of the stock. b. Renee recognizes a $84,000 gain on the sale of the stock. c. Chad recognizes dividend income of $21,000 and his stock basis is $61,000 d. Both a and c. are correct. e. None of these.
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's accumulated E & Pas 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?
Mr. Boyd and Ms. Tuck decide to form a new corporation named BT Inc. Mr. Boyd transfers $20,000 cash, equipment (FMV $40,000; adjusted tax basis $41,500), and business inventory ($20,000 FMV; adjusted tax basis $12,000), and Ms. Tuck drafts the legal documents and designs the accounting system for B, valued at $20,000. BT issues 1,000 shares of common stock to its two shareholders. 1. Compute Mr. Boyd's realized and recognized gain on his exchange of property for stock, and determine his tax basis in his BT common shares.
Rare Corporation has accumulated E&P of $2,000,000. The corporation has 1,000 shares of common stock outstanding and owned by unrelated parties as follows: Julie, 500 shares and Jim, 500 shares. Julie and Jim each paid $200 per share for Rare stock 15 years ago. At the end of the year, Rare distributes securities (fair market value $250,000 and adjusted basis of $140,000) to Julie in redemption of 200 share of her stock. How much tax will Julie owe as a result of the redemption? Assume Julie is in the 37% tax bracket.
CB Corporation was formed as a calendar-year S corporation. Casey is a 60 percent shareholder and Bryant is a 40 percent shareholder. On September 30, 2020, Bryant sold his CB shares to Don. CB reported business income for 2020 as follows: (Assume that there are 365 days in the year.) Period Income January 1 through September 30 (273 days) $ 221,900 October 1 through December 31 (92 days) 551,900 January 1 through December 31 $ 773,800 How much 2020 income is allocated to each shareholder if CB Corporation uses the daily method of allocating income?
Liang, a calendar year S corporation, distributes $13,000 cash to its only shareholder, Aaron, on December 31. Aaron’s basis in his stock is $15,000. Liang’s AAA balance is $5,000; Liang holds a $7,500 AEP before this distribution. There is no OAA balance. Complete the following chart
Rahul
After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year, JBD reports $1,000,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO’s tax rate on the dividend income (after considering the DRD)?
After several years of profitable operations, Javell, the sole shareholder of JBD Incorporated, a C corporation, sold 22 percent of her JBD stock to ZNO Incorporated, a C corporation in a similar industry. During the current year, JBD reports $2,800,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO's tax rate on the dividend income (after considering the DRD)? [Hint. See §243.] Note: Round the "Tax rate on dividend income" to 2 decimal places. ZNO's tax on dividend received ZNO's tax rate on dividend income $ 129,360 20.98 %