Question

Check my won Required information [The following information applies to the questions displayed below.) Part 1 of 4 10 points Beaver Corporation reported taxable income of $500,000 from operations this year. During the year, the company made a distribution of land to its sole shareholder, Eugenia Van Dam. The land's fair market value was $20,000 and its tax and E&P basis to Beaver was $50,000. Eugenia assumed a mortgage on the land of $25,000. Beaver Corporation had accumulated E&P of $1,500,000. (Leave no answer blank. Enter zero if applicable.) eBook a. Compute Beaver's taxable income and federal income tax. Hint Print References Total taxable income Federal income tax

Answer 1

Solution al Computation of Beaver's taxable income 4 federal Income tax Taxable income from Operations & 5ooo Loss on distribution of land | $0 (working wote 1) Beaver Taxable income $ 50000 Federal Income tax (working Note 2) working wote I Since land fair which is less ie. $25000. market value is & Zoon than mortgage on land So loss will not me recognized, so here land's fair market

Value conals the value of mortgage assumed. Working Note 2 Since there Income o as tax per is no crate of Jederal giren, we have put the austion instruution 6) Computation of Beaver's Current E4P Taxable Income $ 500 D Less: Federal Income tax T Adjustment for EAP for the loss on distribution of land Beaver's Current E 4-P | $ 500.000

c) Computation of § 4 p at the Beaver's accumulated beginning of next year Current EAP $ 5ooo of land (50000) Less: E4P basis a distribution - Add: Mortgage assumed $25000 CE4P vajter distribution $ 475000 Acumulated Eap of current year I $ 1500 aro Beaver's accumulated Eup at beginning of next year $ 197500

d.) Eugenia should she report dividend income Eugenia og $0 since the fair market value of land le. & 20000 is less than mortgage liability of $25.000