Taxation

Lanco Corporation, an accrual-method corporation, reported taxable income of $2,450,000 this year. Included in the computation of taxable income were the following items MACRS depreciation of $275,000. Straight-line depreciation would have been $186,000. A net capital loss carryover of $14,400 from last year. A net operating loss carryover of $28,700 from last year. $75,800 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 $7,850 Life insurance proceeds of $286,000. Excess current-year charitable contribution of $3,400 (to be carried over to next year) Tax-deferred gain of $23,000 on a like kind exchange Federal income tax refund from last year of $43,800. Nondeductible life insurance premium of $5,400, Nondeductible interest expense of $3,000 on a loan used to buy tax-exempt bonds. Lanco's accumulated E&P at the beginning of the year was $3,310,000. 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 $95,500. Lanco's tax basis in the land was $19.700. Lug assumed an existing mortgage on the property of $20700 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 Answer is not complete. Answer is not complete. a Current E&P X $ 2.864,150 $ 124,800 b. Dividend income Accumulated E&P, beginning of next year