I:16-50 Earnings and Profits (E&P). During the current year, Nevada Corporation distributed

$100,000 in cash to its sole shareholder. Because the corporation has a $300,000 accumulated E&P deficit at the beginning of the current year and only $30,000 of taxable income in the current year, Nevada’s controller believes that the distribution should be treated as a tax-free return of capital to the shareholder. Your investigation reveals the following information that may have an effect on the computation of current E&P:

Federal income tax liability $ 6,300 Dividends-received deduction 60,000 Excess of MACRS depreciation over Alternative Depreciation System depreciation 30,000 Excess charitable contributions 9,000

a. What is Nevada’s current E&P?

b. How much (if any) of the $100,000 cash distribution is taxable as a dividend to the sole shareholder?

c. What is the amount of Nevada’s accumulated E&P balance (deficit) on the last day of the current year?