During 2018, A Corporation had the following book and taxable income:

Income
Operating Income			$150,000
Dividend income from 100% owned subsidiary			$30,000
Tax-exempt Interest Income			$20,000
Gain on installment note for book purposes (no cash received)			$50,000
Total Income						$250,000
Expenses
Salaries			$290,000
Depreciation using straight line			$40,000
Capital Loss			$10,000
Penalty			$10,000
T otal Expenses						$350,000
Net Book Income						($100,000)
Book to tax adjustments
Tax-exempt Interest Income		($20,000)
Book gain			($50,000)
Capital Loss limitation		$10,000
Penalty		$10,000
Total Adjustments before DRD						($50,000)
TI before DRD						($150,000)
DRD						($30,000)
Taxable Income						($180,000)

On December 31, 2018, A Co. had $200,000 of Accumulated Earnings and Profits.

On June 30, 2019, A Co. distributes $150,000 to B, its sole shareholder. B has a basis of $30,000 in his A Co. stock.

a. What is A Co.’s current E&P for 2020?

b. How is the distribution taxed to B?

Answer rating: 100% (QA)

a A Corporations current EP for 2020 is 200000 180000 30000 190000 Th... View the full answer