Taxation of reorganizations & liquidations dividends ABC Corp (ABC) was formed 15 years ago by Able and
Question:
ABC Corp (ABC) was formed 15 years ago by Able and Body (2 individuals). ABC uses the cash method of accounting and reports on a calendar year basis. A & B still own 100 shares each of the 200 shares of ABC. On 3/01 of the current year, ABC distributed $40,000 in total - $20,000 each to A and B, and 9/30 of the current year, ABC distributed $70,000 in total - $35,000 each to A and B. No other distributions were made by ABC during the current year.
Assume A's adjusted basis in his ABC shares is $26,000, B’s adjusted basis in his ABC shares is $40,000.
Question:
Unless otherwise stated, assume that the figure for “A/E&P” is the “accumulated earnings and profits” (or deficit) of ABC as of January 1st of the current year. Assume that's the figure for “C/E&P” is the “current earnings and profits” (or deficit) of ABC during the current year. Treat each situation separately and characterize the distributions to A & B.
Answer the following scenarios:
- A/E&P is $50,000 and C/E&P is $40,000
- A/E&P is $0 and C/E&P is $45,000
- A/E&P is $(90,000) and C/E&P is $40,000
- A/E&P is $(55,000) and C/E&P is $(30,000)
Essentials of Federal Taxation 2018
ISBN: 9781260007640
9th edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver