Week 4 Assignment
C:4‑29 Current E&P Computation. Water Corporation reports $500,000 of taxable income for the current year. The following additional information is available:
For the current year, Water reports and $80,000 long-term capital loss and no capital gains.
Taxable income includes $80,000 of dividends from a 10%-owned domestic corporation.
Water paid fines and penalties of $6,000 that were not deducted in computing taxable income.
In computing this year’s taxable income, Water deducted a $20,000 NOL carryover from a prior tax year.
Water claimed a $10,000 U.S. production activities deduction.
Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.
Assume a 34% corporate tax rate. What is Water’s current E&P for this year?
$500,000 Taxable Income +$10,000 U.S. Production Activity +$80,000 Dividends ($6,000) Fines & Penalties ($80,000) Capital Loss +$20,000 NOL Carryover ($40,000) Depreciation $484,000 E&P for current year
C:4‑52 Comparison of Dividends and Redemptions. Bailey is one of four equal unrelated shareholders of Checker Corporation. Bailey has held Checker stock for four years and has a basis in her stock of $40,000. Checker has $280,000 of current and accumulated E&P and distributes $100,000 to Bailey.
What are the tax consequences to Checker and to Bailey if Bailey is an individual and the
For the current year, Water reports and $80,000 long-term capital loss and no capital gains.
Taxable income includes $80,000 of dividends from a 10%-owned domestic corporation.
Water paid fines and penalties of $6,000 that were not deducted in computing taxable income.
In computing this year’s taxable income, Water deducted a $20,000 NOL carryover from a prior tax year.
Water claimed a $10,000 U.S. production activities deduction.
Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.
Assume a 34% corporate tax rate. What is Water’s current E&P for this year?
$500,000 Taxable Income +$10,000 U.S. Production Activity +$80,000 Dividends ($6,000) Fines & Penalties ($80,000) Capital Loss +$20,000 NOL Carryover ($40,000) Depreciation $484,000 E&P for current year
C:4‑52 Comparison of Dividends and Redemptions. Bailey is one of four equal unrelated shareholders of Checker Corporation. Bailey has held Checker stock for four years and has a basis in her stock of $40,000. Checker has $280,000 of current and accumulated E&P and distributes $100,000 to Bailey.
What are the tax consequences to Checker and to Bailey if Bailey is an individual and the