Google Answers Logo
View Question
 
Q: Federal Taxation ( Answered 4 out of 5 stars,   0 Comments )
Question  
Subject: Federal Taxation
Category: Business and Money > Accounting
Asked by: alpa101473-ga
List Price: $10.00
Posted: 07 Apr 2003 19:13 PDT
Expires: 07 May 2003 19:13 PDT
Question ID: 187440
On January 1, Crow Corporation (a calander year taxpayer) has
accumulated Earnings and Profits (E & R) of $250,000.  Its current E &
P for the year is $110,000 (before considering the impact of dividend
distributions).  During the year, Crow distributes $650,000 ($325,000
each) to its equal shareholders Shawn and Andy.  Shawn has a basis in
his stock of $75,000, while Andy's basis is $200,000.  What is the
effect of the distribution by Crow Corporation on Shawn and Andy?
Answer  
Subject: Re: Federal Taxation
Answered By: robertskelton-ga on 07 Apr 2003 19:36 PDT
Rated:4 out of 5 stars
 
Hi again,

Shawn and Andy each have dividend income of $180,000  {[$250,000
(Starling Corporation's accumulated E & P) + $110,000 (Starling
Corporation's current E & P)] 2}. The remaining $290,000 distributed
reduces the basis in the Starling Corporation stock, with the excess
treated as capital gain. Thus, Shawn reduces her basis in the stock to
zero and has a capital gain of $70,000. Andy reduces his stock basis
to $55,000.

I found the same question & answer online, but with different names
and figures, so I re-calculated it:
http://bloodstone.atkinson.yorku.ca/domino/Html/users/pevans/pewwwdl.nsf/0a9ef58d314fedcf85256a03006f17db/7855c1b72b1cc70085256aae000b4c13?OpenDocument


Search strategy: "What is the effect of the distribution by"


Best wishes,
robertskelton-ga

Clarification of Answer by robertskelton-ga on 07 Apr 2003 19:38 PDT
Oops! -  it should have read Crow Corporation like this:

Shawn and Andy each have dividend income of $180,000  {[$250,000 (Crow
Corporation's accumulated E & P) + $110,000 (Crow Corporation's
current E & P)] 2}. The remaining $290,000 distributed reduces the
basis in the Crow Corporation stock, with the excess treated as
capital gain. Thus, Shawn reduces her basis in the stock to zero and
has a capital gain of $70,000. Andy reduces his stock basis to
$55,000.
alpa101473-ga rated this answer:4 out of 5 stars

Comments  
There are no comments at this time.

Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice. Google does not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service or service provider mentioned or any opinion expressed in answers or comments. Please read carefully the Google Answers Terms of Service.

If you feel that you have found inappropriate content, please let us know by emailing us at answers-support@google.com with the question ID listed above. Thank you.
Search Google Answers for
Google Answers  


Google Home - Answers FAQ - Terms of Service - Privacy Policy