Calculate the current earnings and profits (E&P) of Delta Corporation based on the following data:

Delta Corporation is a calendar year, accrual basis taxpayer.

Delta was established in 2019 and has $200,000 in accumulated E&P at the beginning of the 2020 tax year.

The following transactions occurred in 2020:

Taxable income	330,000
Federal income tax liability paid	69,300
Tax-exempt interest income	5,000
Business meals expense (total)	3,000
Premiums paid on key employee life insurance	3,500
Proceeds from key employee life insurance policy	130,000
Excess of capital losses over capital gains	13,000
MACRS Depreciation	26,000
Straight-line depreciation using ADS lives	16,000
Section 179 expense in 2019 (PY)	25,000
Dividends received from domestic corporations (less than 20% owned)	35,000

1. What is the amount of Current Earnings and Profits?

2. Delta distributed $400,000 to its sole shareholder, Mu, on December 31, 2020. Mu’s tax basis in his Delta stock was $75,000 before the distribution.
   1. How much of the distribution is treated as a dividend?

2. What is Mu’s tax basis in Delta stock after the distribution?

3. What is Delta’s balance in accumulated E&P as of January 1 of the following year?

3. What if the beginning accumulated E&P was a deficit of ($200,000), but everything else was the same?
   1. How much of the $400,000 distribution is treated as a dividend?

2. What is Mu’s tax basis in Delta stock after the distribution?

3. What is Delta’s balance in accumulated E&P as of January 1 of the following year?

Answer rating: 100% (QA)

What is the amount of Current Earnings and Profits 719200 200000 beginning EP 330000 taxable income 5000 taxexempt interest income 69300 federal income tax liability paid 3000 business meals expense 3... View the full answer