Blue corporation has a deficit in accumulated E& P of 400,000 and has current E&P of...
Blue corporation has a deficit in accumulated E& P of 400,000 and has current E&P of $360,000. On july 1, Blue distributes $200,000 to its sole shareholder, Sam who has a basis in his stock of $60,000. What are the income tax conseqences to sam and blue corporation as a result of the distribution.
Homework Answers
Answer:
Calculation for Blue Corporattion:
Accumulated E & P = $ 400,000
Current E & P = $ 360,000
(Less) Distrbution = $ 200,000
Remaining E & P = $ 160,000
Tax to be paid by blue corporation is on amount $ 160,000
and sam has to pay tax on $ 60,000 i.e on basis of his stock.
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