5) Puce Corporation, an accrual basis taxpayer, has struggled to survive since its formation, six years ago. As a result, it has a deficit in accumulated E & P at the beginning of the year of $340,000. This year, however, Puce earned a significant profit; taxable income was $240,000. Consequently, Puce made two cash distributions to Martha, its sole shareholder: $150,000 on July 1 and $200,000 December 31. The following information might be relevant to determining the tax treatment of the distributions. This year's taxable income included a net operating loss carryover of $50,000. The corporation's Federal income tax liability is $72,000 for the year. Puce paid nondeductible fines and kickbacks of $10,000. The company also paid nondeductible life insurance premiums of $22,000. The cash surrender value of the corporate-owned life insurance policies increased by $11,000 during the year. The company sold a piece of equipment during the year and reported a 1231 gain of $105,000 and recapture income under $ 1245 of $35,000. There were no other 1231 transactions during the year, but the corporation did have a capital loss carryforward of $30,000. I MACRS depreciation exceeds E&P depreciation by $14,000. In addition, an election under $ 179 was made this year for $18,000 of assets. a. Compute Puce's E & P for the year. b. What are the tax consequences of the two distributions made during the year to Martha (her stock basis is $74,000)? 5) Puce Corporation, an accrual basis taxpayer, has struggled to survive since its formation, six years ago. As a result, it has a deficit in accumulated E & P at the beginning of the year of $340,000. This year, however, Puce earned a significant profit; taxable income was $240,000. Consequently, Puce made two cash distributions to Martha, its sole shareholder: $150,000 on July 1 and $200,000 December 31. The following information might be relevant to determining the tax treatment of the distributions. This year's taxable income included a net operating loss carryover of $50,000. The corporation's Federal income tax liability is $72,000 for the year. Puce paid nondeductible fines and kickbacks of $10,000. The company also paid nondeductible life insurance premiums of $22,000. The cash surrender value of the corporate-owned life insurance policies increased by $11,000 during the year. The company sold a piece of equipment during the year and reported a 1231 gain of $105,000 and recapture income under $ 1245 of $35,000. There were no other 1231 transactions during the year, but the corporation did have a capital loss carryforward of $30,000. I MACRS depreciation exceeds E&P depreciation by $14,000. In addition, an election under $ 179 was made this year for $18,000 of assets. a. Compute Puce's E & P for the year. b. What are the tax consequences of the two distributions made during the year to Martha (her stock basis is $74,000)