1. Corp, Inc. is an accrual basis C corporation. Compute corporate taxable income and E&P for...

 

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1. Corp, Inc. is an accrual basis C corporation. Compute corporate taxable income and E&P for the year. Book revenue and expense and other information is as follows: Accrual basis sales were $50,000,000 (book basis) • In addition to these sales, Corp, Inc. received a $60,000 prepayment for a contract that began in the current year and will be completed in the following year. By the end of the current year, one third of the work had been completed. CGS of $13,000,000 (book basis) . . . . Salaries and benefits of $17,000,000 were paid which includes: CEO's salary of $1,300,000 taxable fringe benefits for the CEO of $40,000 nontaxable fringe benefits for the CEO of $200,000 Dividend income received of $50,000 (<20% ownership) Gain on sale of investments of $20,000 Municipal bond interest received of $20,000 • • Other expenses of $16,000,000 Book depreciation of $2,950,000, MACRS depreciation of $4,380,000, and ADS depreciation of $1,900,000 Federal income tax expense paid of $400,000 Capital loss carryforward from prior year of $200,000 2. James sold the following assets during the current year. What is James's total taxable income related to these sales and how much of that will be taxed at ordinary rates versus long-term capital gain rates? • Land held for investment purchased 5 years ago for $200,000 and sold for • • $180,000 Stock A purchased 6 months ago for $50,000 and sold for $55,000 Coin collection inherited 10 years ago his grandfather - his grandfather had invested $600,000 to purchase all of the coins over a period of many years - at the date of his death, the coin collection was worth $1,500,000- it was sold for $1,750,000 3. In the following independent situations, determine the tax treatment of each distribution (ie, how much of the distribution is a dividend, how much is a nontaxable return of capital, and how much is a capital gain) and determine the corporation's ending E&P they will roll into the following year, if any along with the shareholder's stock basis at the end of the year. * Gray, Inc., has one shareholder, Gene. Gene has basis in his stock of $5,000. The corporation has a current E&P deficit of $6,000 at year end and accumulated E&P of $20,000. On April 1st. The corporation makes a single distribution of $20,000. • Purple, Inc., has one shareholder, Patrice. Patrice has basis in her stock of $1,000. The corporation has a current E&P of $17,000 at year end and accumulated E&P deficit of $12,000. On November 1st, the corporation makes a single distribution of $10,000. • Beige, Inc., has one shareholder, Benita. The corporation has current E&P of $12,000 at year end and accumulated E&P of $16,000. On July 1st, the corporation makes a single distribution of $24,000. Benita's stock basis is $8,000. • Pewter, Inc., has one shareholder, Phez. The corporation has a current E&P of $20,000 at year end and accumulated E&P of $10,000. Phez has basis in his stock of $4,000. The corporation makes a distribution of $25,000 on March 1 and a distribution of $25,000 on November 1 (determine how much of each distribution is taxed in what way). • Gold, Inc., has one shareholder, Grant, on January 1, Grant has basis in his stock of $2,000. On June 30th, Grant sells his stock to Gilly for $8,000. The corporation has a current E&P of $6,000 at year end and accumulated E&P of $5,000. The corporation makes a distribution of $4,000 on March 1 and a distribution of $6,000 on November 1. In addition to determining the tax treatment of each distribution, discuss the taxable gain (loss) for Grant when he sells his stock. • Blue, Inc. has current E&P of $4,000 and accumulated E&P of $5,000 when it redeems 10 shares of Brian's 65 shares of stock for $10,000. Brian's basis in his stock is $8,000. Blue had 100 shares of stock before the redemption. How is the redemption taxed and what is Blue's E&P and Brian's stock basis after the redemption? Does the answer change if Blue redeemed 31 shares from Brian for $31,000? 1. Corp, Inc. is an accrual basis C corporation. Compute corporate taxable income and E&P for the year. Book revenue and expense and other information is as follows: Accrual basis sales were $50,000,000 (book basis) • In addition to these sales, Corp, Inc. received a $60,000 prepayment for a contract that began in the current year and will be completed in the following year. By the end of the current year, one third of the work had been completed. CGS of $13,000,000 (book basis) . . . . Salaries and benefits of $17,000,000 were paid which includes: CEO's salary of $1,300,000 taxable fringe benefits for the CEO of $40,000 nontaxable fringe benefits for the CEO of $200,000 Dividend income received of $50,000 (<20% ownership) Gain on sale of investments of $20,000 Municipal bond interest received of $20,000 • • Other expenses of $16,000,000 Book depreciation of $2,950,000, MACRS depreciation of $4,380,000, and ADS depreciation of $1,900,000 Federal income tax expense paid of $400,000 Capital loss carryforward from prior year of $200,000 2. James sold the following assets during the current year. What is James's total taxable income related to these sales and how much of that will be taxed at ordinary rates versus long-term capital gain rates? • Land held for investment purchased 5 years ago for $200,000 and sold for • • $180,000 Stock A purchased 6 months ago for $50,000 and sold for $55,000 Coin collection inherited 10 years ago his grandfather - his grandfather had invested $600,000 to purchase all of the coins over a period of many years - at the date of his death, the coin collection was worth $1,500,000- it was sold for $1,750,000 3. In the following independent situations, determine the tax treatment of each distribution (ie, how much of the distribution is a dividend, how much is a nontaxable return of capital, and how much is a capital gain) and determine the corporation's ending E&P they will roll into the following year, if any along with the shareholder's stock basis at the end of the year. * Gray, Inc., has one shareholder, Gene. Gene has basis in his stock of $5,000. The corporation has a current E&P deficit of $6,000 at year end and accumulated E&P of $20,000. On April 1st. The corporation makes a single distribution of $20,000. • Purple, Inc., has one shareholder, Patrice. Patrice has basis in her stock of $1,000. The corporation has a current E&P of $17,000 at year end and accumulated E&P deficit of $12,000. On November 1st, the corporation makes a single distribution of $10,000. • Beige, Inc., has one shareholder, Benita. The corporation has current E&P of $12,000 at year end and accumulated E&P of $16,000. On July 1st, the corporation makes a single distribution of $24,000. Benita's stock basis is $8,000. • Pewter, Inc., has one shareholder, Phez. The corporation has a current E&P of $20,000 at year end and accumulated E&P of $10,000. Phez has basis in his stock of $4,000. The corporation makes a distribution of $25,000 on March 1 and a distribution of $25,000 on November 1 (determine how much of each distribution is taxed in what way). • Gold, Inc., has one shareholder, Grant, on January 1, Grant has basis in his stock of $2,000. On June 30th, Grant sells his stock to Gilly for $8,000. The corporation has a current E&P of $6,000 at year end and accumulated E&P of $5,000. The corporation makes a distribution of $4,000 on March 1 and a distribution of $6,000 on November 1. In addition to determining the tax treatment of each distribution, discuss the taxable gain (loss) for Grant when he sells his stock. • Blue, Inc. has current E&P of $4,000 and accumulated E&P of $5,000 when it redeems 10 shares of Brian's 65 shares of stock for $10,000. Brian's basis in his stock is $8,000. Blue had 100 shares of stock before the redemption. How is the redemption taxed and what is Blue's E&P and Brian's stock basis after the redemption? Does the answer change if Blue redeemed 31 shares from Brian for $31,000?

Answer rating: 100% (QA)

Sure lets address the taxrelated scenarios provided 1 Corp Incs Corporate Taxable Income and EP for the Year Accrual basis sales 50000000 Prepayment received for a contract 60000 deferred to the follo... View the full answer