John owns all 100 shares of stock in Jamaica Corporation, which has $100,000 of current E&P. John would like to receive a $50,000 distribution from the corporation. Jamaica owns several assets that it could distribute to John. What are the tax consequences of Jamaicas distributing each of the following assets? Assume Jamaica has a 21% marginal tax rate and, unless stated otherwise, its bases for E&P and taxable income purposes are the same. $50,000 cash. 100 shares of XYZ stock purchased two years ago for $10,000 and now worth $50,000. 100 shares of ABC stock purchased one year ago for $72,000 and now worth $50,000. Equipment purchased four years ago for $120,000 that now has a tax adjusted basis of $22,000 and an E&P adjusted basis of $40,000. John would assume a liability of $31,000 on the equipment. The equipment is now worth $81,000. An installment obligation with a face value of $50,000 and a basis of $32,000. Jamaica acquired this obligation three years ago when it sold land held as an investment. Would your answers in Parts ae change if Jamaica redeems 50 of Johns shares for each of the properties listed? Based on the foregoing results, which distribution would you recommend? Which distribution(s) should be avoided? Would your answers in Parts ae change if Johns 100 shares represented one third of Jamaicas outstanding shares, unrelated parties owned the remaining 200 shares, and Jamaica exchanged all of Johns shares for each of the properties listed? If John were an investor, would treating the distribution as a sale be preferable to treating the distribution as a dividend? Why or why not? Expert Answerinformation icon An expert answer will be posted here Up next for you in Accounting Robin Corporation, a calendar year taxpayer, has a deficit in current E & P of $200,000 and a $580,000 positive balance in accumulated E & P. If Robin determines that a $700,000 distribution to its shareholders is appropriate See answer ____ 32. Emily is in the 35% marginal tax bracket. She can purchase a York County school bond yielding 3.5% interest and the interest is not subject to a 5% state tax. But she is interested in earning a higher return for comparable risk. a. If sh See answer See more questions for subjects you study Questions viewed by other students Q: Maria Garcia is a CPA whose firm has prepared the tax returns of Stanley Corporation for many years. A review of Stanleys last three tax returns by a new staff accountant, who has been assigned to the client for the first time, reveals that the corporation may be paying excessive compensation to one of its key officers. The staff accountant feels that the firm should inform the IRS... A: See answer Q: When the IRS audited Winter Corporation's current year tax return, the IRS disallowed $10,000 of travel and entertainment expenses incurred by Charles, an officer-shareholder, because of inadequate documentation. The IRS asserted that the $10,000 expenditure was a constructive dividend to Chrles, who mairlaincd hai the: expm: was buin re lated. Charle argued that he derived no... A: See answer 100% (2 ratings) Show more Post a question Answers from our experts for your tough homework questions