Andromeda Corporation (a calendar year, accrual basis taxpayer) had the following transactions in 2021:

Taxable Income	$295,000
Federal Income Tax Liability Paid	62,000
Tax-Exempt Interest Income	3,000
Excess of Capital Loss over Capital Gains	7,000
Section 179 Expense elected in 2021	15,000
Dividends Received from Domestic Corporations (less than 20% owned)	40,000
MACRS Depreciation deduction	18,000
Straight-line depreciation using ADS class lives	10,000

Compute E & P for tax year 2021 and go to Part 2.

PART 2: On December 31st, Andromeda Corporation distributes $100,000 to Jack and Jill, who each own 50% of the corporation. At the beginning of the current year, Andromeda Corporation has a deficit in accumulated E&P of $(53,000). Using the figure for current E&P that you calculated in part 1, determine the tax treatment of distribution for the shareholders. (assume each shareholder has adequate basis in the corporation).

Attach an excel document with your calculations.

Answer rating: 100% (QA)

Answer Part 1 To calculate the Earnings and Profits EP of Andromeda Corporation for the tax year 202... View the full answer