Brent, Matt, Chris, Brad, and Anwer are five unrelated shareholders, and they each owns 20 of the 100 outstanding shares of Aggie Corporation. On June 30 of this year, Aggie distributed $100,000 in cash to the shareholders. On September 30 of this year, Aggie redeemed all Anwer's shares for $80,000. Aggie had $45,000 of accumulated E&P at the beginning of the year and reported $120,000 of current E&P at year-end. What is Aggie's accumulated E&P at the beginning of next year? Consult Revenue Rule 74-338. (Hint: determine the tax status of the redemption and then calculate the effect of the June distribution on current E&P.) Note: Negative amount should be indicated with a minus sign. Answer is not complete. Current E&P Less dividends paid $ 120,000 (100,000) Undistributed Current E&P $ 20,000 Prorated Undistributed Current E&P at 9/30 $ 15,000 Add Accumulated E&P at the beginning of year 45,000 Total Accumulated E&P at 9/30 $ 60,000 Reduce Accumulated E&P by Add current E&P in 4th quarter Accumulated E&P at beginning of next year $ 60,000
Brent, Matt, Chris, Brad, and Anwer are five unrelated shareholders, and they each owns 20 of the 100 outstanding shares of Aggie Corporation. On June 30 of this year, Aggie distributed $100,000 in cash to the shareholders. On September 30 of this year, Aggie redeemed all Anwer's shares for $80,000. Aggie had $45,000 of accumulated E&P at the beginning of the year and reported $120,000 of current E&P at year-end. What is Aggie's accumulated E&P at the beginning of next year? Consult Revenue Rule 74-338. (Hint: determine the tax status of the redemption and then calculate the effect of the June distribution on current E&P.) Note: Negative amount should be indicated with a minus sign. Answer is not complete. Current E&P Less dividends paid $ 120,000 (100,000) Undistributed Current E&P $ 20,000 Prorated Undistributed Current E&P at 9/30 $ 15,000 Add Accumulated E&P at the beginning of year 45,000 Total Accumulated E&P at 9/30 $ 60,000 Reduce Accumulated E&P by Add current E&P in 4th quarter Accumulated E&P at beginning of next year $ 60,000
Chapter19: Corporations: Distributions Not In Complete Liquidation
Section: Chapter Questions
Problem 57P
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Vikarmbhai
Transcribed Image Text:Brent, Matt, Chris, Brad, and Anwer are five unrelated shareholders, and they each owns 20 of the 100 outstanding shares of Aggie
Corporation. On June 30 of this year, Aggie distributed $100,000 in cash to the shareholders. On September 30 of this year, Aggie
redeemed all Anwer's shares for $80,000. Aggie had $45,000 of accumulated E&P at the beginning of the year and reported
$120,000 of current E&P at year-end. What is Aggie's accumulated E&P at the beginning of next year? Consult Revenue Rule 74-338.
(Hint: determine the tax status of the redemption and then calculate the effect of the June distribution on current E&P.)
Note: Negative amount should be indicated with a minus sign.
> Answer is not complete.
Current E&P
$
120,000
Less dividends paid
(100,000)
Undistributed Current E&P
$
20,000
Prorated Undistributed Current E&P at 9/30
S
15,000
Add Accumulated E&P at the beginning of year
45,000
Total Accumulated E&P at 9/30
$
60,000
Reduce Accumulated E&P by
Add current E&P in 4th quarter
Accumulated E&P at beginning of next year
$
60,000
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