?? Yellow Corporation has a deficit in accumulated E & P of $600,000 and has acurrent E & P of $450,000. On July 1, Yellow distributes $500,000 to its soleshareholder, Eugene, who has a basis in his stock of $105,000. As a result ofthe distribution, Eugene has:A. dividend income of $450,000 and no adjustment to stock basis.B. dividend income of $105,000 and reduces his stock basis to zero.C. dividend income of $450,000 and reduces his stock basis to $55,000.D. no dividend income reduces his stock basis to zero and has a capital gainof $500,000.E. None of the above.

Step 1: Definition of Dividend:A dividend means the amount that a company gives to the shareholders…

Answered: Yellow Corporation has a deficit in…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter13: Corporations: Earning & Profits And Distributions

Section: Chapter Questions

Problem 19P

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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.
Ans
R Corporation has a negative current earnings and profits for tax year 20X7 of $15,000. Accumulated earnings and profits as of the beginning of 20X7 equal $10,000. On June 1, 20X7, R Corporation distributes $6,000 cash to its sole shareholder Y, whose basis in the stock is $2,000. What is the amount of dividend income that Y must report for the year (if zero, write zero as the answer)? Do any allocations on a per-month basis instead of a per-day basis.
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Twinning, a calendar year S corporation, distributes $62,200 cash to its only shareholder, Carl, on December 31. Before the distribution, Carl's basis in his stock is $74,640, Twinning 's AAA balance is $27,990, and Twinning has $9,330 of AEP. What is Carl’s stock basis after the distribution? Answer_______
During the year, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. At the end of last year, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct? a. Nutt recognizes a $1,000 LTCG. b. Nutt's stock basis is $2,000. c. Nutt's ordinary income is $15,000. d. Nutt's tax-free return of capital is $11,000.'
Q Corporation, an S corporation, is solely owned by V. V’s stock basis at the beginning of the year is $8,000. Q has the following beginning-of-year account balances: Accumulated Adjustments Account (AAA) $10,000 Accumulated Earnings and Profits (AE&P) 15,000 Other Adjustments Account (OAA) 6,000 For the year, Q Corporation reported net ordinary income of $12,000 and tax-exempt income of $7,000. It also made a cash distribution to V at year-end of $30,000. Calculate the corporation's AAA and AE&P at year-end. SHOW WORK FOR PARTIAL CREDIT.
On January 1, 2018, Fisher Corporation paid $2,290,000 for 35 percent of the outstanding voting stock of Steel, Inc., and appropriately applies the equity method for its investment. Any excess of cost over Steel’s book value was attributed to goodwill. During 2018, Steel reports $720,000 in net income and a $100,000 other comprehensive income loss. Steel also declares and pays $20,000 in dividends.a. What amount should Fisher report as its Investment in Steel on its December 31, 2018, balance sheet?b. What amount should Fisher report as Equity in Earnings of Steel on its 2018 income statement?
Longhorn Company reports current E&P of $120,000 in 20X3 and accumulated E&P at the beginning of the year of negative $240,000. Longhorn distributed $360,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in his stock in Longhorn is $120,000. How is the distribution treated by the shareholder in 20X3? Multiple Choice $120,000 dividend. $120,000 dividend, $120,000 tax-free return of basis, and $120,000 capital gain. $120,000 dividend and $240,000 tax-free return of basis. $0 dividend, $120,000 tax-free return of basis, and $240,000 capital gain.
On January 1, 20X8, Ball Corporation purchased shares of Leftwich Company common Stock. Assume the stock acquired by Ball represents 15% of Leftwich’s voting stock and that Ball has no influence over Leftwich’s business decisions. Use the financial statement effects template (with amounts and accounts) to record the following transactions. Ball purchased 5,000 common shares of Leftwich at $15 cash per share. Leftwich reported annual net income of $40,000. Ball received a cash dividend of $1.10 per common share from Leftwich. Year-end market price of Leftwich common stock is $19.00 per share. Assume that the stock acquired by Ball represents 30% of Leftwich’s voting stock and that Ball accounts for this investment using the equity method because it is able to exert significant influence. Use the financial statement effects template (with amounts and accounts) to record the following transactions. Ball purchased 5,000 common shares of Leftwich at $15 cash per share. Leftwich…
Dd.62.
4. Reed Corporation has a deficit in accumulated E & P of $300,000 and has current E & P of $225,000. On 12/31/19, Reed distributes $250,000 to its sole shareholder, Sam, who has a basis in his stock of $55,500. Required: Calculate the following at the Corporation level. a. Dividend distributionb. ROCc. Ending Accumulated E&P at 12/31/19. 5. Tan Corporation has Accumulated E & P of $250,000. Current year E&P of 50,000.It distributes land with a fair market value of $75,000 (adjusted basis of $90,000) to its sole shareholder, Troy: a. What is Troy’s Dividend income?b. How much is added/subtracted in calculating Tan’s E&P

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