Question

Check my w Required information [The following information applies to the questions displayed below.] Part 1 of 5 Volunteer Corporation reported taxable income of $440,000 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 $115,000 and its tax and E&P basis to Volunteer was $20,000. Rocky assumed a mortgage attached to the land of $23,000. The company had accumulated E&P of $774,000 at the beginning of the year. points eBook a. Compute Volunteer's total taxable income and federal income tax. Hint Print References Total taxable income Federal income tax

Answer 1

Part A

Taxable income from operations	440000
Gain on distribution of land (115000-20000)	95000
Total taxable income	345000
Federal income tax ($345,000 x 21%)	$(72450)

Part B

Taxable income	345000
Less:
Federal income tax	(72450)
Adjustment for E&P gain on distribution of land	0
Current E&P	$272550

Part C

Current E&P	272550
Less:
Fair market value of land distributed	(115000)
Add:
Mortgage assumed by Rocky	23000
CE&P after distribution	180550
Accumulated E&P, beginning of year	774000
Accumulated E&P, beginning of 2010	$954550

Part D

dividend income= fair market value of the land – liability = 115000-23000 = $92000

Part E

income tax basis = fair market value of the land = $115000