Lanco Corporation, an accrual-method corporation, reported taxable income of $1,700,000 this year. Included in the computation of taxable income were the following items: MACRS depreciation of $250,500. Straight-line depreciation would have been $164,000. A net capital loss carryover of $16,700 from last year. A net operating loss carryover of $31,100 from last year. $67,200 capital gain from the distribution of land to the company's sole shareholder (see below). Not included in the computation of taxable income were the following items: Tax-exempt income of $6,000. Life insurance proceeds of $344,000. Excess current-year charitable contribution of $4,800 (to be carried over to next year). Tax-deferred gain of $22,800 on a like-kind exchange. Federal income tax refund from last year of $41,400. Nondeductible life insurance premium of $4,200. Nondeductible interest expense of $1,800 on a loan used to buy tax-exempt bonds. Lanco's accumulated E&P at the beginning of the year was $3,230,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi (Lug) Nutt: June 30: $84.500. September 30: Parcel of land with a fair market value of $83,500. Lanco's tax basis in the land was $16,300. Lug assumed an existing mortgage on the property of $19,200. Required: a. Compute Lanco's current E&P. b. Compute the amount of dividend income reported by Lug Nutt this year as a result of the distributions. c. Compute Lanco's accumulated E&P at the beginning of next year. a. Current E&P b. Dividend income c. Accumulated E & P, beginning of next year Lanco Corporation, an accrual-method corporation, reported taxable income of $1,700,000 this year. Included in the computation of taxable income were the following items: MACRS depreciation of $250,500. Straight-line depreciation would have been $164,000. A net capital loss carryover of $16,700 from last year. A net operating loss carryover of $31,100 from last year. $67,200 capital gain from the distribution of land to the company's sole shareholder (see below). Not included in the computation of taxable income were the following items: Tax-exempt income of $6,000. Life insurance proceeds of $344,000. Excess current-year charitable contribution of $4,800 (to be carried over to next year). Tax-deferred gain of $22,800 on a like-kind exchange. Federal income tax refund from last year of $41,400. Nondeductible life insurance premium of $4,200. Nondeductible interest expense of $1,800 on a loan used to buy tax-exempt bonds. Lanco's accumulated E&P at the beginning of the year was $3,230,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi (Lug) Nutt: June 30: $84.500. September 30: Parcel of land with a fair market value of $83,500. Lanco's tax basis in the land was $16,300. Lug assumed an existing mortgage on the property of $19,200. Required: a. Compute Lanco's current E&P. b. Compute the amount of dividend income reported by Lug Nutt this year as a result of the distributions. c. Compute Lanco's accumulated E&P at the beginning of next year. a. Current E&P b. Dividend income c. Accumulated E & P, beginning of next year
