Answered: ofits of $200,000 and current earnings…

ofits of $200,000 and current earnings and profits of $20,000. Ann has stock basis in Rock Corporations of $90,000. Assume instead that Ann is

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 28P

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Question

Rock Corporation distributed property with a fair market value of $100,000 and an adjusted basis of $70,000 to Ann, a shareholder of Rock Corporation. Prior to the distribution, Rock Corporation had a deficit in accumulated earnings and profits of $200,000 and current earnings and profits of $20,000. Ann has stock basis in Rock Corporations of $90,000.

Assume instead that Ann is a C corporation (Ann, Inc.) and that Ann, Inc. has a 15% interest in Rock Corporation. Determine the tax liability of Ann, Inc. on this distribution of property.

Definition Definition Remaining net income of the company after the required dividends are paid to shareholders. This surplus money is usually invested back into the business to expand its business operations or launch a new product.

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