Jasper Junction Corporation (JJC) is an accrual basis, calendar-year entity that was created by Chao, Iris,...

 

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Jasper Junction Corporation (JJC) is an accrual basis, calendar-year entity that was created by Chao, Iris, and Nolan in 20X1. JJC furnishes the original incorporation agreement. The shareholiders' bases in the assets contributed are as follows: • Cash $150,000 • Equipment $245,000 • Inventory $380.000 • Land and Building $375,000 The first five years of business have been lean years. Nolan had to loan the corporation $75,000 to ensure that JJC had enough cash to pay its bills and its Accumulated Eanings and Profits only amounts to S23.000 at the end of 20X5. JJC has its first year of substantial income in 20X6. it also sells some of its land for $100.000 cash, but the sale results in a capital loss. The Board of Directors decides to pay $250.000 in dividends to its shareholders. This is in addition to the $3,500 of interest it pays on the bonds and the $1,500 it pays to Nolan on the money he loaned JJC. The income and expenses of JJC for 20X6, taxable income, and current E&P are provided in the Table below. Corporate Agreement Taxable Current Amount Income ESP Income Taxable Income Sales COGS Dividends (own 5%) Muni Bond Interest Expenses Capital loss Interest Expense Operating Expenses Key Life Insurance Premiums Taxable income before Special Deductions Charitable Contributions 176, 500 412,000 412,000 150,000 (150,00) 133,000 133,000 1,000 1,e00 32,935 5,000 (5,000) 120,0০ (120,908) 6,000 (32,935) (6,000) Dividend Receivable Deduction Taxable Income Federal Income Tax 270,000 30,000 (27,00e) (3,e00) (66,500) 66,50e 176,500 37,065 (37,e65) Current E&P 165,000 Analyze the information provided to reconcile the shareholders' beginning and ending bases in their stock to determine the federal tax consequences of JJC's corporate distributions. (Decreases should be entered with a minus sign.) Ownership Percentage (%) Beginning Basis in Stock Increases or (Decreases) Ending Basis in Stock Taxable Distributions (Dividends/Capital Gains) Shareholder Chao 5. Dividends 6. Capital gains 11. Dividends 12. Capital gains 17. Dividends 1. 2. 3. 4. Iris 7. 8 9. 10 Nolan 13 14. 15. 16. 18. Capital gains Jasper Junction Corporation (JJC) is an accrual basis, calendar-year entity that was created by Chao, Iris, and Nolan in 20X1. JJC furnishes the original incorporation agreement. The shareholiders' bases in the assets contributed are as follows: • Cash $150,000 • Equipment $245,000 • Inventory $380.000 • Land and Building $375,000 The first five years of business have been lean years. Nolan had to loan the corporation $75,000 to ensure that JJC had enough cash to pay its bills and its Accumulated Eanings and Profits only amounts to S23.000 at the end of 20X5. JJC has its first year of substantial income in 20X6. it also sells some of its land for $100.000 cash, but the sale results in a capital loss. The Board of Directors decides to pay $250.000 in dividends to its shareholders. This is in addition to the $3,500 of interest it pays on the bonds and the $1,500 it pays to Nolan on the money he loaned JJC. The income and expenses of JJC for 20X6, taxable income, and current E&P are provided in the Table below. Corporate Agreement Taxable Current Amount Income ESP Income Taxable Income Sales COGS Dividends (own 5%) Muni Bond Interest Expenses Capital loss Interest Expense Operating Expenses Key Life Insurance Premiums Taxable income before Special Deductions Charitable Contributions 176, 500 412,000 412,000 150,000 (150,00) 133,000 133,000 1,000 1,e00 32,935 5,000 (5,000) 120,0০ (120,908) 6,000 (32,935) (6,000) Dividend Receivable Deduction Taxable Income Federal Income Tax 270,000 30,000 (27,00e) (3,e00) (66,500) 66,50e 176,500 37,065 (37,e65) Current E&P 165,000 Analyze the information provided to reconcile the shareholders' beginning and ending bases in their stock to determine the federal tax consequences of JJC's corporate distributions. (Decreases should be entered with a minus sign.) Ownership Percentage (%) Beginning Basis in Stock Increases or (Decreases) Ending Basis in Stock Taxable Distributions (Dividends/Capital Gains) Shareholder Chao 5. Dividends 6. Capital gains 11. Dividends 12. Capital gains 17. Dividends 1. 2. 3. 4. Iris 7. 8 9. 10 Nolan 13 14. 15. 16. 18. Capital gains

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