Jayhawk Company reports current E&P; of $465,000 and accumulated E&P; of negativ

Question

Jayhawk Company reports current E&P; of $465,000 and accumulated E&P; of negative $315,000. Jayhawk distributed $542,500 to its sole shareholder, Christine Rock, on the last day of the year. Christine's tax basis in her Jayhawk stock is $76,250. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.) value: 1.00 points Required information a. How much of the $542,500 distribution is treated as a dividend to Christine? Dividend References eBook & Resources Problem Difficulty: 2 Medium Learning Objective: 18-02 Compute a corporation's earnings and profits and a shareholder's dividend income. Check my work 2. ve ue: 1.00 points Required information

Explanation / Answer

Ans 1 Dividend $465,000 The dividend income of $465000 is from current E & P of $465000 ans 2 Tax basis is $0 Tax basis is reduced to $0 as Lesser of $76250 (current basis) or distribution is excess of current E & P 77500 ($542500-465000) is deducted from $76250 $76250-$76250=$0 ans the remaining differnce is treated as capital gain (77500-76250)=$1250 ans 3 Balance is -$315000 As current E & P is $0 because it is distributed as dividend hence the beginning balance in accumulated E & P is carryover If any doubt please comment

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