Illini Corporation reported taxable income of $500,000 from operations for this year. The company paid federal income

Question:

Illini Corporation reported taxable income of $500,000 from operations for this year. The company paid federal income taxes of $170,000 on this taxable income. During the year, the company made a distribution of an automobile to its sole shareholder, Carly Urbana. The auto's fair market value was $30,000 and its tax basis to Illini was $0. The auto's E&P basis was $15,000. Any gain from the distribution will be taxed at 34 percent. Illini had accumulated E&P of $1,500,000.

a. Compute Illini's total taxable income and federal income tax.

b. Compute Illini's current E&P before the distribution.

c. Compute Illini's accumulated E&P at the beginning of next year.

d. What amount of dividend income does Carly report as a result of the distribution?

e. What is Carly's tax basis in the auto she received from Illini?

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