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Tennis, Corporation, a calendar-year corporation,  had a deficit in accumulated earnings and profits of $(800,000) and a positive balance in current earnings and profits of $100,000.  On December 31, 2021, Tennis, Corporation distributed a building to Darrel, its sole shareholder.  The building had a fair market value of $500,000 and an adjusted basis to the corporation of $150,000.  Darrel also assumed the $300,000 mortgage on the building.  Darrel is in the 37% tax bracket .   Determine the tax consequences to Darrel from this distribution of building and mortgage. Be

Tennis, Corporation, a calendar-year corporation,  had a deficit in accumulated earnings and profits of $(800,000) and a positive balance in current earnings and profits of $100,000.  On December 31, 2021, Tennis, Corporation distributed a building to Darrel, its sole shareholder.  The building had a fair market value of $500,000 and an adjusted basis to the corporation of $150,000.  Darrel also assumed the $300,000 mortgage on the building.  Darrel is in the 37% tax bracket .   Determine the tax consequences to Darrel from this distribution of building and mortgage. Be

FINANCIAL ACCOUNTING
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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Tennis, Corporation, a calendar-year corporation,  had a deficit in accumulated earnings and profits of $(800,000) and a positive balance in current earnings and profits of $100,000.  On December 31, 2021, Tennis, Corporation distributed a building to Darrel, its sole shareholder.  The building had a fair market value of $500,000 and an adjusted basis to the corporation of $150,000.  Darrel also assumed the $300,000 mortgage on the building.  Darrel is in the 37% tax bracket .

 

  1. Determine the tax consequences to Darrel from this distribution of building and mortgage. Be specific—and show your calculations.


  2. What are the tax consequences to Tennis, Corporation from this distribution?


  3. After this distribution, what are the earnings and profits of Tennis, Corporation?
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