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Unformatted text preview: ock at January 1, 2004
Accumulated earnings and profits at January 1, 2004
Current earnings and profits for 2004 (from operations) $500,000
60,000 What was taxable as dividend income to Reed for 2004?
$200,000 CPA-02092 Explanation
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Becker CPA Review, PassMaster Questions
Lecture: Regulation 3 Choice "d" is correct. A dividend paid in property other than money is taxable to an individual taxpayer to
the extent of the property's fair market value, but not in excess of the current and accumulated earnings
and profits of the distributing corporation. In this case the fair market value of the dividend is $200,000. It
is taxable to the extent that Kent had current earnings ($60,000) plus accumulated earnings and profits
($125,000) plus any gain generated on the distribution itself ($50,000); thus the dividend is taxable to the
extent of $...
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