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E&P, earnings and profits, stock redemption, attribution

16- A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?

17- Grand River Corporation reported taxable income of $500,000 in 2010 and paid federal income taxes of $170,000. Not included in the computation was a disallowed meals and entertainment expense of $2,000, tax-exempt income of $1,000, and deferred gain on an installment sale of $25,000. The corporation's current earnings and profits for 2010 would be

18- Au Sable Corporation reported taxable income of $800,000 in 2010 and paid federal income taxes of $272,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 2009 of $50,000. Au Sable is an accrual basis taxpayer. The corporation's current earnings and profits for 2010 would be

19- Tammy owns 100 shares in Star Struck Corporation. The other 100 shares are owned by her husband Tommy. Which of the following statements is true?

20- Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?

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A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. Thecorporation makes a $600 distribution to its sole shareholder. Which of thefollowing statements is true?
A. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution.
B. $500 of the distribution will be a dividend because total earnings and profits is $500.
C. $0 of the distribution will be a dividend because current earnings and profits is negative.
D. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000.

Tammy owns 100 shares in Star StruckCorporation. The other 100 shares are owned by her husband Tommy. Which of thefollowing statements is true?
A. A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as a dividend if Tammy waives the family attribution rules and files a "triple i" agreement with the IRS.
B. A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as an exchange for tax purposes.
C. A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as a dividend for tax purposes.
D. A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as an exchange if Tammy waives the family attribution rules and files a "triple i" agreement with the IRS.

Which of the following individuals is notconsidered "family" for purposes of applying the stock attributionrules to a stock redemption?

A. Spouse
B. Parents
C. Grandchildren
D. Grandparents

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16. A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?
A. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution.
B. $500 of the distribution will be a dividend because total earnings and profits is $500.
C. $0 of the distribution will be a dividend because current earnings and profits is negative.
D. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000.

If I understand that E&P is $1000 coming into the year, then it is decreased by current E&P of $500. That would leave only $500 of accumulated earnings which could be taxed as dividends. The remaining $100 is a return of capital. If the reasoning is correct, then B is the answer
http://www.honeckotoole.com/files/docs/Microsoft%20Word%20-%20Corporate%20current%20and%20accumulated%20earnings%20and%20profits.pdf

17- Grand River Corporation reported taxable income of ...

Solution Summary

The cited solutions carefully explain the concepts in taxation.

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