3. (5 points) ABC Corp. reported $91,500 US taxable income for the current year. It provided the following information for computing earnings and profits:

Dividends received from 45% owned corporation $10,000

Interest from tax exempt municipal bonds 2,000

Tax depreciation using MACRS (straight line depreciation

would be $12,000) 15,000

Long term capital gain 8,000

Compute ABC's current earnings and profits before considering taxes.

4. (6 points) W Corp. owns 90% of B Corp. The remaining 10% is owned by unrelated parties. In a Sect. 332 qualified liquidation , B Corp. distributes property to W Corp. with a fair market value of $80,000( basis $30,000). B Corp. also distributed property to the minority shareholders with a fair market value of $11,000 (basis $9,000).

a) How much gain or loss does B Corp. recognize?

b) How much gain or loss do the minority shareholders recognize?

5. (10 points) X Corporation purchased 100% of the stock of the stock of Y Corporation in 2021 and made a Section 338 election. The fair market value of Y Corporation's assets is $1.3 M and the adjusted basis is $900,000.

a.) Assuming a corporate tax rate of 21%, what is Y Corporation's recognized gain or loss?

b.) What is the basis of the assets acquired by X Corporation?

c.) In general terms, how is the basis of assets acquired by X Corporation allocated?

d.) What happens to the attributes of Y Corporation after the Section 338 election?

e.) In general terms, how do you determine if a Section 338 election is worthwhile?

Answer rating: 100% (QA)

Solutions 3 ABC Corp Earnings and Profits Current EP Taxable income 91500 Add Nondeductible expenses ... View the full answer