This year, Sooner Company reports current E&P of negative $300,000. Its accumula

Question

This year, Sooner Company reports current E&P of negative $300,000. Its accumulated E&P at the beginning of the year was $200,000. Sooner distributed $400,000 to its sole shareholder, Boomer Wells, on June 30 of this year. Boomer’s tax basis in his Sooner stock is $75,000.(Leave no answer blank. Enter zero if applicable.) (Negative amounts should be indicated by a minus sign.)

How much of the $400,000 distribution is treated as a dividend to Boomer?

What is Boomer’s tax basis in his Sooner stock after the distribution?

What is Sooner’s balance in accumulated E&P on the first day of next year?

How much of the $400,000 distribution is treated as a dividend to Boomer?

Explanation / Answer

a. Accumulated E & P att the beginning                           200,000 Deficit in Current E&P                           300,000 Proportionate deficit on Jun 30                           148,767 Net Suplus in E&P on Jun 30                             51,233 So dividend to Boomer $                   51,232.88 b. Total Distribution to oomer                           400,000 Available accmulated E&P on Jun30                             51,233 1 Distribution in excess of accumulated E&P                           348,767 2 Tax basis of boomer in the beginning                             75,000 Tax basis after distribution = Beginning basis less lesser of 1 &2                =75000-75000     = Zero So Tax bais of Boomer after distribution = 0 c Sooner's Balance in Accumulated E&P on Jan 1 next year Accumulated E&P in the beginnng                           200,000 Deficit                         (300,000) Dividend Distributed                           (51,233) Sooner's Balance in Accumulated E&P on Jan 1 next year                         (151,233)

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