Question

Check my w Required information [The following information applies to the questions displayed below.) Part 1 of 3 10 Jayhawk Company reports urrent E&P of $310,000 and a deficit in accumulated E&P of ($282,500). Jayhawk distributed $505,000 to its sole shareholder, Christine Rock, on the last day of the year. Christine's tax basis in her Jayhawk stock is $128,750. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) points Skipped a. How much of the $505,000 distribution is treated as a dividend to Christine? eBook Hint Dividend Print References

Answer 1

Answer:

a. Distribution treated as a dividend is equal to current E&P of $310,000.

b. Christine's tax basis in Jayhawk stock after distribution is = Max of (0, Current E&P + Previous tax basis - Jayhawk's distribution)

= Max of (0, $310,000 + $128,750 - $505,000)

= Max of (0, - $66,250)

= $0

c. Jayhawk's balance in accumulated E&P on the first day of next year is deficit of ($282,500) since all E&P of last year is paid as dividend.