Neil Gonzales, ACCT 420-V3WW, Assignment 5-1Final

Neil Gonzales, ACCT 420-V3WW, Assignment 5-1Final - Neil...

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Neil Gonzales Assignment 5-1 Chapter 19 Assessment Problems 25 points Due: May 29 Purpose To assess your ability to: 1. Calculate earnings and profits. 2. Allocate earnings and profits in corporate distributions. 3. Relate earnings and profits and the role earnings and profits play in an organization. 4. Determine the tax impact on property dividends, stock dividends, stock rights, and constructive dividends. L 3 Traits Action Items 1. Complete problems 32, 34, 39, 42, 43, 44, 46, 50, and 54 in Chapter 19 of West Federal Taxation . Chapter 19: 32. On September 30, Sparrow Corporation, a calendar year taxpayer, sold a parcel of land (basis of $300,000) for a $900,000 note. The note is payable in five installments with the first payment due next year. Because Sparrow did not elect out of the installment method, none of the $600,000 gain is taxed this year. Sparrow Corporation had a $400,000 deficit in accumulated E&P at the beginning of the year. Before considering the effect of the land sale, Sparrow had a deficit in current E&P of $100,000. Oren, the sole shareholder of Sparrow, has a basis of $150,000 in his stock. If Sparrow distributes $950,000 to Oren on December 31, how much income must he report for tax purposes? 34. In each of the following independent situations, indicate the effect on taxable income and E&P stating the amount of any increase (or decrease) as a result of the transaction. Assume E&P has already been increased by taxable income.
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_______________________________________________________________________ Taxable Income Increase Transaction (Decrease) (Decrease) ________________________________________________________________________ a. Realized gain of $900,000 on involuntary conversion of building ($20,000 of gain is recognized). b. Mining exploration costs incurred on June 1 of the current year; $36,000 Is deductible from current-year taxable income c. Sale of equipment to unrelated third party for $350,000; basis is $210,000 (no election out of installment method; no payments are received in the current year). d. Dividends of $30,000 received from
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This note was uploaded on 05/25/2011 for the course ACCT 420 taught by Professor Fidler during the Winter '08 term at Franklin.

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Neil Gonzales, ACCT 420-V3WW, Assignment 5-1Final - Neil...

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