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Return to 4 Jasper Junction Corporation (UC) is an accrual basis, calendar year entity that was created by Choo, Irs, and Nolan in 20X1. JUC
Return to 4 Jasper Junction Corporation (UC) is an accrual basis, calendar year entity that was created by Choo, Irs, and Nolan in 20X1. JUC furnishes the original incorporation agreement. The shareholders' bases in the assets contributed are as follows: Cash $150,000 Equipment $245,000 Inventory $380,000 Land and Building $375,000 The first five years of business have been lean years Nolan had to loan the corporation $75.000 to ensure that JJC had enough cash to pay its bits and its Accumulated Earnings and Profits only amounts to $23,000 at the end of 20X5. JJC has its first year of substantial income in 20X6. It also sells some of its land for $100,000 cash, but the sale results in a capital loss The Board of Directors decides to pay $250,000 in dividends to its shareholders. This is in addition to the $3,500 of interest it pays on the bonds and the $1.500 it pays to Nolan on the money he loaned JJC The income and expenses of JJC for 20x6, taxable income and current E&P are provided in the Table below Carnotate Agreement EAP Taxable Current Amount Income Income Taxable Income 176,500 Sales 412,000 412,800 COGS 150,000 (150,000) Dividends on 5) 133,000 133,000 Muni Bond Interest 1,000 1,000 Expenses Capital loss 32,935 (32.935) Interest Expense 5,000 (5,000) Operating Expenses 120,00e (120,000) Key Life Insurance Premium 6,000 (6,690) Taxable income before Special Deductions 270,000 Charitable Contributions 30,000 (27,000) (3,000) Dividend. Receivable Deduction (66,500 66,500 Taxable income 176,500 Federal Income Tax 37,065 (27.065 Current ERP 165,000 Analyze the information provided to reconcile the shareholders' beginning and ending bases in their stock to determine the federal tax consequences of JJC's corporate distributions (Decreases should be entered with a minus sign.) Shareholder Ownership Percentage 12 33% Chao 1 2 Answer is complete but not entirely correct. Beginning Increases Ending Basis in Basis in Txable Distributions Stock (Decreases) Stock (Dividends Capital Galna) $ 38,3333 7.665 34 $375,666 15 Dividends $ 8,333 X 16. Capital $ 10,978 gans 5 383, 3339 s 7665 10 $375,668 11 Dividends $ 83,333 12 Capital $ 10,978 gains 5 383,333 15 7667316 $375,667 17 Dividends SB3333 18. Capital $ 10,978 gains Iris 2 33538 Nolan 13 34% 14
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