Jane is the sole shareholder of Buttons, Inc. Buttons has accumulated earnings a
ID: 2341734 • Letter: J
Question
Jane is the sole shareholder of Buttons, Inc. Buttons has accumulated earnings and profits (E & P) of $65,000 at the beginning of the current year. The current E & P is $35,000. Buttons pays out a property distribution to Jane during the current year with an FMV of $150,000 and an adjusted basis of $130,000. How much is a taxable dividend to Jane?
a.$35,000
b.$100,000
c.$120,000
d.$150,000
2.
Jane is the sole shareholder of Buttons, Inc. Buttons has a deficit of $60,000 in accumulated earnings and profits (E & P) at the beginning of the current year. Current E & P is $35,000. If Buttons pays out a cash distribution to Jane during the current year of $50,000, how much is a taxable dividend to Jane?
a.$0
b.$35,000
c.$50,000
d.$85,000
3.
Ridge Corp., a calendar year C corporation, made a nonliquidating cash distribution to its shareholders of $1,000,000 with respect to its stock. At that time, Ridge's current and accumulated earnings and profits totaled $750,000 and its total paid-in capital for tax purposes was $10,000,000. Ridge had no corporate shareholders. Ridge's cash distribution:
I. Was taxable as $750,000 in dividend income to its shareholders.
II. Reduced its shareholders' adjusted bases in Ridge stock by $250,000.
a.I only
b.II only
c.Both I and II
d.Neither I nor II
4.
Fox Corp. owned 2,000 shares of Duffy Corp. stock that it bought in year 0 for $9 per share. In year 8, when the fair market value of the Duffy stock was $20 per share, Fox distributed this stock to a noncorporate shareholder. Fox’s recognized gain on this distribution was:
a.$40,000
b.$22,000
c.$18,000
d.$0
5.
On January 1, year 5, Olinto Corp., an accrual basis, calendar year C corporation, had $35,000 in accumulated earnings and profits. For year 5, Olinto had current earnings and profits of $15,000 and made two $40,000 cash distributions to its shareholders, one in April and one in September of year 5. What amount of the year 5 distributions is classified as dividend income to Olinto’s shareholders?
a.$15,000
b.$35,000
c.$50,000
d.$80,000
Explanation / Answer
Solution:
Answer 1 :
From the given data we need to find the taxable dividend to jane;
The investors esteem for the property appropriated is the Fair market estimation of the property according to IRS.
The equitable esteem is considered as the measure of dissemination.
Subsequently, the taxable dividend would be $ 150000.
So option d . $150,000 is correct.
Answer 3 :
Option C is correct answer for this question
C) Both I and II
I. Was taxable as $750,000 in dividend income to its shareholders.
II. Reduced its shareholders adjusted bases in Ridge stock by $250,000.
Answer 4 :
Given data,
Fox Corp. owned 2,000 shares of Duffy Corp
stock that it bought in year 0 for $9 per share.
In year 8, when the fair market value of the Duffy stock was $20 per share,
Fox distributed this stock to a noncorporate shareholder
Fox’s recognized gain on this distribution was:
In year 0,
Share capital of Fox corporation = (2,000 * $9)
= $1,800
In year 8,
The market value of above shares is $20 per each share
Share capital of Foc corporation = (2000 * $20)
= $40,000
Finally the Fox corporation's gain is = ($40,000 - $18,000)
= $22,000
So, option b is correct for this question.
Answer 5 :
From the given data we need to find The amount of the year 5 distributions is classified as dividend income to Olinto’s shareholders:
Explaination:
Money appropriated well beyond accessible equalization in Olinto. partnership's held profit will be considered as capital reimbursement and not profit income.That seems to be,
Held income, starting parity--------------- $35,000
Include: Net pay for year 5 --------------- $15,000
Total retained earnings available ---- $50,000
Hence, money appropriated to investors amid year 5 will be considered as profit salary in the hands of investors to the degree of $50,000 as it were. Despite the fact that aggregate money appropriated amid year 5 = $40,000 * 2 = $80,000 , measure of the year 5 dispersions that will be named profit salary to Olinto's investors is $50,000 as it were.
The correct answer is Option C $55,000
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