Tax question, calculate E&P. Spartan Corporation redeemed 25 percent of its shar

Question

Tax question, calculate E&P.

Spartan Corporation redeemed 25 percent of its shares for $2,100 on July 1 of this year, in a transaction that qualified as an exchange under 9302(a). Spartan's accumulated E&P; at the beginning of the year was $2,100. Its current E&P; is $21,100. Spartan made dividend distributions of $3,300 orn June 1 and $4,500 on August 31. Determine the beginning balance in Spartan's accumulated E&P; at the beginning of the next year. See Rev. Rul. 74-338, 1974-2 C.B. 101, and Rev. Rul. 74-339, 1974-2 C.B. 103, for help in making this calculation. (Round your intermediate calculations to the nearest whole dollar amount.)

Explanation / Answer

Answer

calculation of the accumulated E &P at the beginning of the next year

current EP = ( 21100 - 3300 - 4500 ) = 13300

accumulated EP on july 1 = 2100 + 13300 * 182 /365

= 8732

accumulated EP at next year = 2100 + 21100 - 3300 - 4500 - 2183

= 13217

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