Item36

10points

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Item36

Item 36 10 points

Lanco Corporation, an accrual-method corporation, reported taxable income of $1,900,000 this year. Included in the computation of taxable income were the following items:

• MACRS depreciation of $306,500. Straight-line depreciation would have been $218,000.
• A net capital loss carryover of $15,600 from last year.
• A net operating loss carryover of $34,200 from last year.
• $76,350 capital gain from the distribution of land to the companys sole shareholder (see below).

Not included in the computation of taxable income were the following items:

• Tax-exempt income of $6,500.
• Life insurance proceeds of $260,000.
• Excess current-year charitable contribution of $5,300 (to be carried over to next year).
• Tax-deferred gain of $28,100 on a like-kind exchange.
• Federal income tax refund from last year of $42,000.
• Nondeductible life insurance premium of $3,400.
• Nondeductible interest expense of $2,700 on a loan used to buy tax-exempt bonds.

Lanco's accumulated E&P at the beginning of the year was $2,750,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi (Lug) Nutt:

• June 30: $78,500.
• September 30: Parcel of land with a fair market value of $91,750. Lancos tax basis in the land was $15,400. Lug assumed an existing mortgage on the property of $19,400.

Required:

1. Compute Lancos current E&P.

Current E & P: $1,894,400

Dividend Income: $150,850

1. Compute Lancos accumulated E&P at the beginning of next year.

1,

Accumulated E & P, beginning of next year

$