National Tax 432 Chapter 15 Solutions

National Tax 432 Chapter 15 Solutions -...

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Earnings and Profi ts Defi ned 1. E&P is a tax term. E&P provides an indication of the corporation’s ability to pay a dividend. It is used to determine how much of each distribution represents dividend income. Earnings and Profi ts—Current and Accumulated 2. Current E&P is computed annually. Corporations begin with no accumulated E&P. Current E&P that is not distributed is added to accumulated E&P; therefore, accumulated E&P is the sum of all years’ undistributed Earnings and Profi ts—Adjustments excluded from taxable income and E&P, (2) nondeductible items that reduce E&P, (3) exempt income that Basis in Property Dividend 4. A shareholder’s basis in a property distribution is the property’s fair market value at date of distribution. Property Distributions—Gain or Loss 5. Losses are not recognized. Gains are recognized on appreciated property but not on the corporation’s own stock or stock rights. Property Distributions—Liability on Property 6. The shareholder’s dividend income equals fair market value minus the liability but basis in the property
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This note was uploaded on 11/22/2011 for the course ACC 432B taught by Professor Wolod during the Fall '11 term at National.

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National Tax 432 Chapter 15 Solutions -...

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