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5. mike is the sole shareholder of Led Corporation. The basis of his stock is $65,000....

5. mike is the sole shareholder of Led Corporation. The basis of his stock is $65,000. mike distributes $150,000 to Rob in 20X1. Eamings and profits for mike are $45,000. What are the tax consequences of the distribution? Taxable Dividend a. $ 40,000 b. $ 45,000 c.$ 45,000 d. $150,000 e. all are incorrect
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Answer #1

Answer:

Option B and C : $45,000

Explanation:

Here the total taxable dividend will be $45,000.

Out of the total distribution to Rob = $150,000

Actual stock basis = $65,000

Remaining Capital gain = Total Distribution - Taxable dividend - Actual stock basis

=$150,000 - $45,000 - $65,000

= $40,000

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