Bonus Inc. was incorporated on January 1, 2015. It's taxable income each year since incorporation is as
Question:
Bonus Inc. was incorporated on January 1, 2015. It's taxable income each year since incorporation is as follows:
2019 - 100,000
2020 - 100,000
2021 - 1,000,000
2022 - 1,000,000.
Bonus Inc. had two equal shareholders, Mr. Student and Miss Masters, who are unrelated. Mr. Student's basis in the corporation at January 1, 2022 was $100,000, and Miss Masters' basis was $500,000. Mr. Student started the corporation in 2019, and Miss Masters became a shareholder on January 1, 2022. During 2022, Bonus Inc. made the following distributions, which were divided equally to the two shareholders:
June 1, 2022 - 500,000
September 1, 2022 - 1,000,000
December 1, 2022 - 1,000,000.
A. Calculate Bonus Inc's accumulated E&P at January 1, 2022.
B. Calculate the 2022 current E&P.
C. What are the tax consequences to Mr. Student as a result of the June 1 distribution.
D. What are the tax consequences to Mr. Student as a result of the September 1 distribution.
E. What are the tax consequences to Mr. Student as a result of the December 1 distribution.
F. What are the tax consequences to Miss Masters as a result of the December 1 distribution.
G. What are Bonus Inc.'s accumulated earnings and profits as at January 1, 2023
Expert Answer:
Answer A To calculate Bonus Incs accumulated EP at January 1 2022 we need to sum up the taxable inco... View the full answer
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell
