Lanco Corporation, an accrual-method corporation, reported taxable income of $2,230,000 this year. Included in the computation...

Lanco Corporation, an accrual-method corporation, reported taxable income of $2,230,000 this year. Included in the computation of taxable income were the following items:

MACRS depreciation of $289,500. Straight-line depreciation would have been $198,000.
A net capital loss carryover of $16,100 from last year.
A net operating loss carryover of $32,500 from last year.
$75,000 capital gain from the distribution of land to the company’s sole shareholder (see below).

Not included in the computation of taxable income were the following items:

Tax-exempt income of $7,500.
Life insurance proceeds of $330,000.
Excess current-year charitable contribution of $2,700 (to be carried over to next year).
Tax-deferred gain of $20,300 on a like-kind exchange.
Federal income tax refund from last year of $35,800.
Nondeductible life insurance premium of $4,500.
Nondeductible interest expense of $3,600 on a loan used to buy tax-exempt bonds.

Lanco's accumulated E&P at the beginning of the year was $2,840,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi (Lug) Nutt:

June 30: $65,000.
September 30: Parcel of land with a fair market value of $88,500. Lanco’s tax basis in the land was $13,500. Lug assumed an existing mortgage on the property of $16,800.

Required:

Compute Lanco’s current E&P.
Compute the amount of dividend income reported by Lug Nutt this year as a result of the distributions.
Compute Lanco’s accumulated E&P at the beginning of next year.

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ekkarill92 answered 1 year ago

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