Question
During 2018, A Corporation had the following book and taxable income: Income Operating Income $150,000 Dividend income from 100% owned subsidiary $30,000 Tax-exempt Interest Income
During 2018, A Corporation had the following book and taxable income:
Income |
|
|
| ||||||
Operating Income |
| $150,000 |
| ||||||
Dividend income from 100% owned subsidiary |
| $30,000 |
| ||||||
Tax-exempt Interest Income |
| $20,000 |
| ||||||
Gain on installment note for book purposes (no cash received) |
| $50,000 |
| ||||||
Total Income |
|
| $250,000 | ||||||
Expenses |
|
|
| ||||||
Salaries |
| $290,000 |
| ||||||
Depreciation using straight line |
| $40,000 |
| ||||||
Capital Loss |
| $10,000 |
| ||||||
Penalty |
| $10,000 |
| ||||||
Total Expenses |
|
| $350,000 | ||||||
Net Book Income |
|
| ($100,000) | ||||||
Book to tax adjustments |
|
|
| ||||||
Tax-exempt Interest Income | ($20,000) |
|
| ||||||
Book gain |
| ($50,000) |
| ||||||
Capital Loss limitation | $10,000 |
| |||||||
Penalty |
| $10,000 |
| ||||||
Total Adjustments before DRD |
|
| ($50,000) | ||||||
TI before DRD |
| ($150,000) |
|
| |||||
DRD |
|
| ($30,000) | ||||||
Taxable Income | ($180,000) | ||||||||
|
|
|
| ||||||
On December 31, 2018, A Co. had $200,000 of Accumulated Earnings and Profits.
On June 30, 2019, A Co. distributes $150,000 to B, its sole shareholder. B has a basis of $30,000 in his A Co. stock.
a. What is A Co.s current E&P for 2020?
b. How is the distribution taxed to B?
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