Corporate Distributions
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1)
ISH AB = $40
ISH % ownership = 50%
CSH AB = $100
CSH % ownership = 50%
CEP= $0
AEP = 100
Dates of Distributions:
4/1/10, 12/1/10
On April 2, 2010 (one-fourth of the way through the year), D Corp makes a distribution of $100 to Shareholders. A $100 distribution is declared on 12/1/2010, payable on 12/31/2010 to SHs of record on 12/15/2010. D Corp mails a $100 check to CSH and a $100 check to ISH on 12/31/2010. The checks are received by CSH and ISH on 1/3/2011.
Now suppose D Corp's Acc' E&P as of 12/31/2010 was $100 and its current E&P in 2006 is $0. Calculate the allocation of distributions.
2)
ISH AB = $40
ISH % ownership = 50%
CSH AB = $100
CSH % ownership = 50%
CEP= $(120) deficit
AEP = 100
Dates of Distributions: 4/1/10, 12/1/10
On April 2, 2010 (one-fourth of the way through the year), D Corp makes a distribution of $100 to Shareholders. A $100 distribution is declared on 12/1/2010, payable on 12/31/2010 to SHs of record on 12/15/2010. D Corp mails a $100 check to CSH and a $100 check to ISH on 12/31/2010. The checks are received by CSH and ISH on 1/3/2011.
Now suppose: suppose T Corp's Acc' E&P as of 12/31/2010 was $100 and T Corp has C E&P deficit of ($120). Calculate the allocation of distributions.
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Solution Summary
This solution explains how to calculate the allocation distributions for a particular company and explains the answer to a series of accounting questions.
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Background:
Refer to Section 301 and 316 of the Code
Remember that E&P measures a company's economic ability to pay dividends to its shareholders. Current E&P (CEP) is the annual economic ability while accumulated E&P (AEP) sums all the undistributed CEP balances for all previous years reduced by the sum of all previous CEP deficits and any distributions made.
Whenever CEP is ZERO, then the distribution in excess of E&P are treated as a return of capital that reduces the stockholders' basis in the stock, and any distribution in excess of basis are treated as capital gains if and only if the stock is ...
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