Beaver Corporation reported taxable income of $500,000 from operations this year. The company paid federal income taxes

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Beaver Corporation reported taxable income of $500,000 from operations this year. The company paid federal income taxes of $170,000 on this taxable income. During the year, the company made a distribution of land to its sole shareholder, Eugenia VanDam. The land's fair market value was $20,000 and its tax and E&P basis to Beaver was $50,000. Eugenia assumed a mortgage on the land of $25,000. Any gain from the distribution will be taxed at 34 percent. Beaver had accumulated E&P of $1,500,000.
a. Compute Beaver's total taxable income and federal income tax.
b. Compute Beaver's current E&P before the distribution.
c.
Compute Beaver's accumulated E&P at the beginning of next year.
d. What amount of dividend income does Eugenia report as a result of the distribution?
e.
What is Eugenia's income tax basis in the land received from Beaver?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Taxation Of Individuals And Business Entities 2015

ISBN: 9780077862367

6th Edition

Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

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