Field Corporation reported current earnings and profits for 20X3 of $500,000. During the year, the company...

Field Corporation reported current earnings and profits for 20X3 of $500,000. During the year, the company made a distribution of land to its sole shareholder, Mary. i. The land's fair market value was $130,000 and its adjusted basis in Field was $80,000. ii. Mary assumed a mortgage attached to the land of $25,000. a. What amount of dividend income does Mary report because of the distribution (assume sufficient E&P for dividend treatment)? b. What is Mary's income tax basis in the land received from Field? c. What is the result for Field Corporation's taxable income? d. What is Field Corporation's Accumulated E&P reduction? Enter as a positive number.

Expert Solution

In the above question Field Corporation has distributed land to its sole share holder

a) As per the Incomr tax Act any assets distributed by the company in this case Field Corporation to its shareholder I.e Mary to the extent the company possesses accumulated profit whether capitalised or not shall be treated as deemed Dividend.

Fair Market value of the asset on the date of distribution will be considered to compute deemed dividend.

In this case since the company has sufficient E&P the entire Fair value of Land will be considered as deemed dividend. Hence $130000 shall be reported as dividend Income.

b) Marys income tax basis in the land received will be the FMV of the land on the date of distribution i.e $130000.

c) Field corporations taxable income will not be impacted by this transaction and hence he will have to pay tax on the entire $500000 assumed it is a taxable income.

d) Field Corporations Accumulated profits will reduce by $ 130000.

ekkarill92 answered 2 years ago

What is the difference between current earnings and profits and accumulated earnings and profits?

Marathon Inc. (a C corporation) reported $1,350,000 of taxable income in the current year. During the...

Marathon Inc. (a C corporation) reported $1,350,000 of taxable income in the current year. During the year, it distributed $135,000 as dividends to its shareholders as follows: $6,750 to Guy, a 5 percent individual shareholder. $20,250 to Little Rock Corp., a 15 percent shareholder (C corporation). $108,000 to other shareholders. How much of the dividend payment did Marathon deduct in determining its taxable income? Assuming Guy’s marginal ordinary tax rate is 37 percent, how much tax will he pay on...

Marathon Inc. (a C corporation) reported $1,750,000 of taxable income in the current year. During the...

Marathon Inc. (a C corporation) reported $1,750,000 of taxable income in the current year. During the year, it distributed $175,000 as dividends to its shareholders as follows: (Leave no answer blank. Enter zero if applicable.) $8,750 to Guy, a 5 percent individual shareholder. $26,250 to Little Rock Corp., a 15 percent shareholder (C corporation). $140,000 to other shareholders. How much of the dividend payment did Marathon deduct in determining its taxable income? Assuming Guy’s marginal ordinary tax rate is 37...

Explain how a corporation computes its current and accumulated Earnings & Profits balances. Why is it...

Explain how a corporation computes its current and accumulated Earnings & Profits balances. Why is it necessary to distinguish between current and accumulated Earnings & Profits.

Please answer the 3 question below about the Miller Corporation Miller Corporation ‐ Year 20X3 During the...

Please answer the 3 question below about the Miller Corporation Miller Corporation ‐ Year 20X3 During the year, you paid the amounts owed for Motorcycles at the end of year 20X2 and collected all the amounts owed by customers for 20X2. You purchased 25 more Motorcycles for $6,000 each and at the same terms as in 20X2. During the year, you sold 22 Motorcycles for $11,000 each at the same terms as 20X2. You paid the money owed to suppliers (Accounts Payable) at the beginning of the...

The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales...

The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 34 percent. What is the retained earnings balance at the end of the year?

Volunteer Corporation reported taxable income of $435,000 from operations this year. During the year, the company...

Volunteer Corporation reported taxable income of $435,000 from operations this year. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The land’s fair market value was $87,000 and its tax and E&P basis to Volunteer was $62,000. Rocky assumed a mortgage attached to the land of $17,400. The company had accumulated E&P of $792,000 at the beginning of the year. A) Compute Volunteer’s total taxable income and federal income tax. B) Compute Volunteer's...

Volunteer Corporation reported taxable income of $470,000 from operations this year. During the year, the company...

Volunteer Corporation reported taxable income of $470,000 from operations this year. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The land’s fair market value was $85,000 and its tax and E&P basis to Volunteer was $58,500. Rocky assumed a mortgage attached to the land of $17,000. Any gain from the distribution will be taxed at 21 percent. The company had accumulated E&P of $780,000 at the beginning of the year. b. Compute...

For 2018 tax purposes, Cass Corporation reported pretax book income of $10,000,000. During the current year,...

For 2018 tax purposes, Cass Corporation reported pretax book income of $10,000,000. During the current year, the reserve for bad debts increased by $100,000. In addition, tax depreciation exceeded book depreciation by $200,000. Cass Corporation sold a fixed asset and reported book gain of $50,000 and tax gain of $75,000. Finally, the company received $250,000 of tax-exempt life insurance proceeds from the death of one of its officers. Compute the company’s current income tax expense or benefit.

NEIU Corporation is a C corporation with earnings of $500,000. It paid $150,000 in dividends to...

NEIU Corporation is a C corporation with earnings of $500,000. It paid $150,000 in dividends to its sole shareholder, Victor. Victor also owns 100% of BiCarbon Corporation, an S corporation. BiCarbon had net taxable income of $75,000 and made a $25,000 distribution to Victor. What income will Victor report from NEIU and BiCarbon's activities? A) $75,000 B) $150,000 C) $175,000 D) $225,00

Question