Exam 4: Corporate Nonliquidating Distributions

Peach Corporation was formed four years ago. Its current E&P (or E&P deficit) and distributions for the most recent four years are as follows: What is Peach's accumulated E&P at the beginning of 2006, 2007, 2008, and 2009?

In the current year, Pearl Corporation has $300,000 of current and accumulated E&P. On June 3, Pearl Corporatio distributes a parcel of land (a capital asset) worth $120,000 to Betty, a shareholder. The land has a $60,000 adjuste to Pearl Corporation and is subject to a $16,000 mortgage, which Betty assumes. Assume a 34% marginal corpora rate. a) What is the amount and character of the income recognized by Betty as a result of the distribution? b) What is Betty's basis for the land? c) What is the amount and character of Pearl's gain or loss as a result of the distribution? d) What effect does the distribution have on Pearl's E&P?

Identify which of the following increases Earnings & Profits.

Identify which of the following statements is true.

Tomika Corporation has current and accumulated earnings and profits of $0. Tomika distributes $10,000 to its sole shareholder, Alana. What are Tomika's earnings and profits after the distribution?

Bruce receives 20 stock rights in a nontaxable distribution. The stock rights have an FMV of $5,000. The common stock with respect to which the rights are issued has a basis of $4,000 and an FMV of $120,000. Bruce allows the stock rights to lapse. He can deduct a loss of

Boxer Corporation buys equipment in January of the current year with a seven- year class life for $15,000. The corporation expensed the $15,000 under Sec. 179. The deduction in the year of purchase for E&P purposes due to the acquisition and expensing of the equipment is

Identify which of the following statements is false.

Digger Corporation has $50,000 of current and accumulated E&P. On March 1, Digger distributes land with a $3 FMV and a $17,500 adjusted basis to Dave, its sole shareholder. The land is subject to a $5,000 liability which Dav assumes. a) What are the amount and character of the distribution? b) What is Dave's basis in the property? c) When does his holding period for the property begin?

River Corporation's taxable income is $25,000, after deducting a $5,000 NOL carryover from last year and after claiming a $10,000 dividends- received deduction. What is the current E&P?

In 2010, Tru Corporation deducted $5,000 of bad debts. It received no tax benefit from the deduction because it h NOL in 2010 that it was unable to carry back or forward. In 2011, Tru recovered $4,000 of the amount due. a) What amount must Tru include in income in 2011? b) What effect does the $4,000 have on E&P in 2011, if any?

How does a shareholder classify a distribution for tax purposes?

Joshua owns 100% of Steeler Corporation's stock. Joshua's basis in the stock is $8,000. Steeler Corporation has E&P of $40,000. If Steeler Corporation redeems 60% of Joshua's stock for $50,000, Joshua must report dividend income of