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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? |
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Subject:
Re: Federal Taxation
Answered By: robertskelton-ga on 07 Apr 2003 19:36 PDT Rated: |
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 | |
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