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Exam 13: Corporations: Earnings and Profits and Distributions

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Question 71

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On January 1, Eagle Corporation (a calendar year taxpayer) has accumulated E & P of $300,000.During the year, Eagle incurs a net loss of $420,000 from operations that accrues ratably.On June 30, Eagle distributes $180,000 to Libby, its sole shareholder, who has a basis in her stock of $112,500.How much of the $180,000 is a dividend to Libby?

A) $0
B) $90,000
C) $112,500
D) $180,000
E) None of these.

F) C) and D)
G) B) and E)

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Question 72

Multiple Choice

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Rose Corporation (a calendar year taxpayer) has taxable income of $300,000, and its financial records reflect the following for the year. Rose Corporation's current E & P is:

A) $254,000.
B) $214,000.
C) $194,000.
D) $104,000.
E) None of these.

F) None of the above
G) B) and E)

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Question 73

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Matching Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2019. a. Increase b. Decrease c. No effect -Gain on installment sale in 2019 deferred until 2020.

Navy Corporation has E & P of $240,000.It distributes land with a fair market value of $70,000 (adjusted basis of $25,000) to its sole shareholder, Troy.The land is subject to a liability of $55,000 that Troy assumes.Troy has:

Robin Corporation distributes furniture (basis of $40,000; fair market value of $50,000) as a property dividend to its shareholders.The furniture is subject to a liability of $55,000.Robin Corporation recognizes gain of:

Ivory Corporation (E & P of $1 million) has 2,000 shares of common stock outstanding owned by unrelated parties as follows: Veronica, 1,000 shares, and Tommie, 1,000 shares.Both Veronica and Tommie paid $150 per share for the Ivory stock 12 years ago.In May of the current year, Ivory distributes land held as an investment (basis of $180,000, fair market value of $390,000) to Veronica in redemption of 350 of her shares. a.What are the tax results to Veronica on the redemption of her Ivory stock? b.What are the tax results to Ivory Corporation on the distribution of the land?

Cedar Corporation is a calendar year taxpayer formed in 2015.Cedar's E & P before distributions for each of the past 5 years is listed below. Cedar's accumulated E & P as of January 1, 2020 is: