1. ABC Company reported current year E&P of $400,000 in 2020. This amount included $4,000 of interest from municipal bonds. If you start with E&P of $400,000 what adjustment will you need to make for the municipal bond interest for purposes of calculating taxable income?

   		a. a $4,000 addition.
   		b. a $4,000 deduction.
   		c. no adjustment.
   		d. none of the above.

2. ABC Company reported current year E&P of $400,000 in 2020. This amount included a state income tax expense of $7,000. If you start with E&P of $400,000 what adjustment will you need to make for the state income tax expense for purposes of calculating taxable income?

		a. a $7,000 addition.
		b. a $7,000 deduction.
		c. no adjustment.
		d. none of the above.

3. X Corporation distributed $10,000 to Andy, its sole shareholder, on May 1, 2020. Andys stock basis in X Corporation, before adjusting for the 2020 distribution, was $8,000. X Corporation had accumulated E & P of $20,000 on January 1, 2020. X Corporation had a loss of $30,000 during the period January 1 June 30, but total year profits as of December 31, 2020 were $5,000. Based on this information, Andy will report:

		a. Dividend income of $10,000 and zero return of capital.
		b. Return of capital of $10,000 and zero dividend income.
		c. Dividend income of $5,000 and return of capital of $5,000.
		d. Dividend income of $5,000 and capital gain of $5,000.
		e. None of the above.

4. X Corporation distributed $10,000 to Andy, its sole shareholder, on May 1, 2020. Andys stock basis in X Corporation, before adjusting for the 2020 distribution, was $8,000. X Corporation had accumulated E & P of $20,000 on January 1, 2020. X Corporation had a $36,000 loss as of December 31, 2020 (incurred evenly throughout the year). Based on this information, Andy will report:

		a. Dividend income of $2,000 and $8,000 return of capital
		b. Return of capital of $2,000 and $8,000 dividend income.
		c. Dividend income of $5,000 and return of capital of $5,000.
		d. Dividend income of $10,000 and capital gain of zero.
		e. None of the above.

5. X Corporation distributed $10,000 to Andy, its sole shareholder, on May 1, 2020. Andys stock basis in X Corporation, before adjusting for the 2020 distribution, was $8,000. X Corporation had a deficit in accumulated E & P of $30,000 on January 1, 2020. X Corporation had a $5,000 profit as of December 31, 2020. Based on this information, Andy will report:

1. 		a. Dividend income of $2,000 and $8,000 return of capital
   		b. Return of capital of $2,000 and $8,000 dividend income.
   		c. Dividend income of $5,000 and return of capital of $5,000.
   		d. Dividend income of $10,000 and capital gain of zero.
   		e. None of the above.