Lanco Corporation, an accrual-method corporation, reported a taxable income of $1,460,000 this year. Included in the computation of taxable income were the following items:

• MACRS depreciation of $200,000. Depreciation for earnings and profits purposes is $120,000.
• A net capital loss carryover of $10,000 from last year.
• A net operating loss carryover of $25,000 from last year.
• $65,000 capital gain from the distribution of land to the companys sole shareholder (see below).

Not included in the computation of taxable income were the following items:

• Tax-exempt income of $5,000.
• Life insurance proceeds of $250,000.
• An excess current-year charitable contribution of $2,500 (to be carried over to next year).
• Tax-deferred gain of $20,000 on a like-kind exchange.
• Nondeductible life insurance premium of $3,500.
• Nondeductible interest expense of $1,000 on a loan used to buy tax-exempt bonds.

Lancos accumulated E&P at the beginning of the year was $2,400,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi (Lug) Nutt:

• June 30: $50,000.
• September 30: Parcel of land with a fair market value of $75,000. Lancos adjusted tax basis in the land was $10,000. Lug assumed an existing mortgage on the property of $15,000.

Required:

1. Compute Lancos current E&P before the distributions.
2. Compute the amount of dividend income reported by Lug Nutt this year as a result of the distributions.
3. Compute Lancos accumulated E&P at the beginning of next year.

Answer is complete but not entirely correct. \begin{tabular}{|l|rr|} \hline a. Current E\&P & $ & 1,326,600 \\ \hline b. Dividend income & $ & 110,000 \\ \hline c. Accumulated E\&P, beginning of next year & $ & 3,616,600 \\ \hline \end{tabular}