ABC Corp. had accumulated earnings and profits as of January 1, 2021 equal to $17,000. For the calendaryear ending December 31, 2021 its current earnings and profits were equal to $10,000. On May 31, 2021,ABC Corp. distributed $32,500 to Smith its sole shareholder. On November 30, 2021, ABC Corp.distributed another $17,500 to Smith. Smith had purchased his ABC Corp, stock from Grey on September15, 2015, paying $19,500 for his shares.a) What is the amount and character of the May 31, 2021 distribution received by Smith?b) What is the amount and character of the November 30, 2021 distribution received by Smith?

The objective of the question is to determine the amount and character of the distributions received…

Answered: ABC Corp. had accumulated earnings and…

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter19: Deferred Compensation

Section: Chapter Questions

Problem 52P

See similar textbooks

Similar questions

During 2019, John was the chief executive officer and a share- holder of Maze, Inc. He owned 60% of the outstanding stock of Maze. In 2016, John and Maze, as co-borrowers, obtained a 100,000 loan from United National Bank. This loan was secured by Johns personal residence. Although Maze was listed as a co-borrower, John repaid the loan in full in 2019. On Mazes Form 1120 tax returns, no loans from shareholders were reported. Discuss whether John is entitled to a bad debt deduction for the amount of the payment on the loan. Partial list of research aids: U S. v. Genere, 405 U.S. 93 (1972). Date H. Sundby, T.C.Memo. 2003-204. Arrigoni v. Comm., 73 T.C. 792 (1980). Estate of Herbert M. Rapoport, T.C.Memo. 1982-584. Clifford L. Brody and Barbara.I DeClerk, T.C. Summary Opinion, 2004-149.
Daniel is the sole shareholder in Helio, Inc., a calendar-year corporation. After operating as a C corporation for 5 years, Helio, Inc, elected S corporation status in 2015. At the beginning of 2021, Daniel had a stock basis in Helio of $100,000, an accumulated adjustments account (AAA) balance of $25,000, and accumulated earnings and profits of $15,000. This year, Daniel receives a $50,000 distribution. Per his k-1 from Helio, Inc., Daniel has a $4,000 long-term capital gain and $10,000 of non-separately stated income. How do you determine Daniel’s ending balance in AAA, AEP and stock basis? How much income, gain or loss will Daniel have as a result of his interest in Helio, inc.?
On March 15, 2021, Smith Corp. (Smith) purchased 18,000 common shares of Costa Inc. (CI) for $72,000, plus transaction costs of $6,000. Smith elected to record the shares of Cl at fair value through other comprehensive income. On July 15, 2021, Smith received a $1.50 per share dividend. At December 31, 2021, the fair value of Cl's shares was $7.00 per share. On February 15, 2022, all the shares of CI were sold for $12.00 per share due to the favourable market rate of the shares. Smith's policy is to transfer the net balance of accumulated other comprehensive income to retained earnings upon derecognition of the investment in Cl's shares. Smith reports under IFRS. Required: a) Prepare all journal entries necessary for the investment-related transactions in 2021. b) Prepare all journal entries necessary for the sale of the shares on February 15, 2022.
Sheffield Inc. owns shares of Tamarisk Corporation stock. At December 31, 2020, the securities were carried in Sheffield’s accounting records at their cost of $997,000, which equals their fair value. On September 21, 2021, when the fair value of the securities was $1,401,000, Sheffield declared a property dividend whereby the Tamarisk securities are to be distributed on October 23, 2021, to stockholders of record on October 8, 2021.Prepare all journal entries necessary on those three dates.
Sandhill Inc. owns shares of Teal Corporation stock. At December 31, 2020, the securities were carried in Sandhill's accounting records at their cost of $916,000, which equals their fair value. On September 21, 2021, when the fair value of the securities was $974,000, Sandhill declared a property dividend whereby the Teal securities are to be distributed on October 23, 2021, to stockholders of record on October 8, 2021. Prepare all journal entries necessary on those three dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date + ♦ Account Titles and Explanation (To record gain or loss) (To record property dividend) Debit Credit
On January 1, 2020, Kinney, Inc., an S corporation, reports $11,200 of accumulated E & P and a balance of $28,000 in AAA. Kinney has two shareholders, Erin and Frank, each of whom owns 500 shares of Kinney's stock. Kinney's nonseparately stated ordinary income for the year is $14,000. Kinney distributes $16,800 to each shareholder on July 1, and it distributes another $8,400 to each shareholder on December 21. How are the shareholders taxed on the distributions? Ignore the 20% QBI deduction. Do not round intermediate computations. If required, round your final answers to the nearest dollar. Erin and Frank each report $ 0 x dividend income for the July 1 distribution and $ 0 X each for the December 21 distribution. Assuming that the shareholders have sufficient basis in their stock, both Erin and Frank each receive a tax-free ✓ 0 X distribution from AAA.
Daniel is the sole shareholder in Helio, Inc., a calendar-year corporation. After operating as a C corporation for 5 years, Helio, Inc, elected S corporation status in 2015. At the beginning of 2021, Daniel had a stock basis in Hello of $100,000, an accumulated adjustments account (AAA) balance of $25,000, and accumulated earnings and profits of $15,000. This year, Daniel receives a $50,000 distribution. Per his k-1 from Helio, Inc., Daniel has a $4,000 long term capital gain and $10,000 of non-separately stated income. a. Determine Daniel's ending balance in AAA, AEP and stock basis. b. How much income, gain or loss with Daniel have as a result of his interest in Helio, inc.? Be specific. c. Daniel said, "I'm so happy that converted from being a C corporation to an 5-corporation-since I know that I can get the $50,000 cash out of the business without tax. During the C corp days, the $50,000 would have been subject to a 21% tax." How would you respond to Daniel?
Pete, the sole shareholder of Robin Corporation, had a basis of $120,000 in Robin stock that he sold to Adam on August 1, 2020, for $180,000. Robin had accumulated E & P of $26,000 on January 1, 2020, and current E & P (for 2020) of $90,000. During 2020, Robin made the following distributions: $60,000 cash to Pete on July 1, 2020, and $120,000 to Adam on November 1, 2020. Required: Determine the tax consequences of the distribution to Pete and his gain on the sale of his stock to Adam. b. What are the tax consequences of the distribution to Adam?
Bravo, Incorporated, owns all of the stock of Echo, Incorporated. For 2024, Bravo reports Income (exclusive of any Investment Income) of $480,000. Bravo has 80,000 shares of common stock outstanding. It also has 5,000 shares of preferred stock outstanding that pay a dividend of $15,000 per year. Echo reports net income of $290,000 for the period with 80,000 shares of common stock outstanding. Echo also has a liability from its 10,000, $100 bonds that pay annual Interest of $8 per bond. Each of these bonds can be converted Into two shares of common stock. Bravo owns none of these bonds. Assume a tax rate of 21 percent. Required: What amount should Bravo report as diluted earnings per share? Note: Round your answer to 2 decimal places. Diluted earnings per share
Pearl Inc. owns shares of Martinez Corporation stock. At December 31, 2020, the securities were carried in Pearl’s accounting records at their cost of $821,000, which equals their fair value. On September 21, 2021, when the fair value of the securities was $1,333,000, Pearl declared a property dividend whereby the Martinez securities are to be distributed on October 23, 2021, to stockholders of record on October 8, 2021.Prepare all journal entries necessary on those three dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Wineseller Corporation is owned by Mortimer Smith, its sole shareholder. Mortimer has a $20,000 basis in his Wineseller Corporation stock. Mortimer is in the 37% tax bracket. Wineseller Corporation is in the 21% tax bracket. Wineseller Corporation has the following balances as of December 31, 2021. Accumulated Earnings and Profits (AEP) ($600,000) Current Earnings and Profits $ 70,000 On December 31, 2021, Wineseller Corporation distributes $160,000 to Mortimer. How would your answer above be different if instead Wineseller Corporation had the following balances: Accumulated Earnings and Profits (AEP) $500,000 Current Earnings and Profits (480,000) Assume that Mortimer still receives a distribution of $160,000 and has stock basis of $20,000
Wineseller Corporation is owned by Mortimer Smith, its sole shareholder. Mortimer has a $20,000 basis in his Wineseller Corporation stock. Mortimer is in the 37% tax bracket. Wineseller Corporation is in the 21% tax bracket. Wineseller Corporation has the following balances as of December 31, 2021. Accumulated Earnings and Profits (AEP) ($600,000) Current Earnings and Profits $ 70,000 On December 31, 2021, Wineseller Corporation distributes $160,000 to Mortimer. What are the tax consequences to Mortimer from receiving this distribution from Wineseller Corporation? Use the facts in part a, but assume that rather than cash, Mortimer received an asset with a fair market value of $200,000 and a basis to the corporation of $120,000. How much tax would Mortimer owe from this distribution? What are the tax implications to Wineseller Corporation?

SEE MORE QUESTIONS

Recommended textbooks for you

Individual Income Taxes

Accounting

ISBN:

9780357109731

Author:

Hoffman

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SWFT Individual Income Taxes

Accounting

ISBN:

9780357391365

Author:

YOUNG

Publisher:

Cengage

SWFT Essntl Tax Individ/Bus Entities 2020

Accounting

ISBN:

9780357391266

Author:

Nellen

Publisher:

Cengage

Individual Income Taxes

Accounting

ISBN:

9780357109731

Author:

Hoffman

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SWFT Individual Income Taxes

Accounting

ISBN:

9780357391365

Author:

YOUNG

Publisher:

Cengage

SWFT Essntl Tax Individ/Bus Entities 2020

Accounting

ISBN:

9780357391266

Author:

Nellen

Publisher:

Cengage

SWFT Comprehensive Volume 2019

Accounting

ISBN:

9780357233306

Author:

Maloney

Publisher:

Cengage

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

SWFT Corp Partner Estates Trusts

Accounting

ISBN:

9780357161548

Author:

Raabe

Publisher:

Cengage

SEE MORE TEXTBOOKS