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

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Volunteer Corporation reported taxable income of $500,000 from operations this year. The company paid federal income taxes of $105,000 on this taxable
income. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The land’s fair market value was $75,000 and its tax and E&P basis to Volunteer was $25,000. Rocky assumed a mortgage attached to the land of $15,000. The company had accumulated E&P of $750,000 at the beginning of the year.
a. Compute Volunteer’s total taxable income and federal income tax.
b. Compute Volunteer’s current E&P. 

c. Compute Volunteer’s accumulated E&P at the beginning of next year.
d. What amount of dividend income does Rocky report as a result of the distribution?
e.
What is Rocky’s income tax basis in the land received from Volunteer?

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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Essentials Of Federal Taxation 2019

ISBN: 9781260190045

10th Edition

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

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