TAX 5015 (Fall 2011) – Chapter review exercise #4 Topic review: E&P and dividend distributions Due date: September 22, 2011 Name(s): Part 1: Ironsides Corporation has E&P of $51,000 as of December 31, 2010. It reports taxable income (before any distributions to its shareholder) of $340,000 in 2010. On December 31, Ironsides distributes property worth $200,000, adjusted basis of $120,000 to Karissa, its sole shareholder. Karissa assumes a $70,000 liability on the property. The corporation reported the following additional information for 2010: •included in taxable income is $10,000 of profit from a 2009 installment sale •incurred a Federal tax liability of $115,600 (before the distribution to Karissa) •paid key-man life insurance premiums of $2,000 •received term life insurance proceeds of $46,000 on the death of an officer •received tax-exempt interest revenue of $3,500 Required: a. How much income must Karissa recognize in 2010 as a result of the property distribution and what basis does Karissa take in the property? b. What is Ironsides’ current E&P for 2010?
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Taxation in the United States, 1920, Karissa, chapter review exercise