4. In 20xs, Iron Corporation sold some excess property for $2,500 to Eric, one o

Question

4. In 20xs, Iron Corporation sold some excess property for $2,500 to Eric, one of its shareholders. On the date of sale, the property had a FMV of $6,000 and an adjusted basis of $4,000 Eric must report a dividend of a so b. $2,000 c. $2,500 d. $3,500 5. On December 1, 20X8, Plum Corp. distributed to its sole shareholder a parcel of land held as an investment that was subject to a mortgage of $5,000. The land's adjusted basis was $6,500, FMV $14,000. For the year ended December 31, 20x8, Plum had earnings and profits of $30,000 regard to the dividend distribution. By how much should the dividend distribution reduce the earnings and profits for 20X8? a. $1,500 b. $6,500 c. $9,000 d. $14,000 6. Thistle Corporation's earnings and profits for 20X8, its first year of operations, were $70,000. In December 20X8 it distributed to Lee, one of its shareholders, land with a basis of $20,000 and a FMV of $60,000. What is the amount of distribution that will be taxed as a dividend to Lee? a. $0 b. $20,000 c. $50,000 d. $60,000 7. In item 6 above, if Lee also assumed a liability of $50,000 on the land, what will be Lee's tax basis in the land it received? a. $0 b. $20,000 c. $50,000 d. $60,000 8. Pim, Inc., which had earnings and profits of $100,000, distributed land to Alex, a stockholder adjusted basis for this land was $3,000. The land had a FMV of $12,000 and was subject to a Pim's mortgage liability of $5,000, which was assumed by Alex. How much of the distribution was taxable o Alex as a dividend? . $9,000 b. $7,000 c. $4,000 d. $3,000

Explanation / Answer

4) Dividend = FMV of Property - Sale Price of Property charged from Eric = 6000 - 2500 = $ 3,500

5 ) Dividend = FMV of Land - (Sale Price of Land charged from shareholder + Mortgage Value)

= 14000 - (0 + 5000) = $ 9,000

6) Dividend = FMV of Property - Sale Price of Property charged from Lee = 60000- 0 = $ 60,000

7) Dividend = FMV of Land - (Sale Price of Land charged from Lee + Liability on Land)

= 60000 - ( 0 + 50000) = 110000

But Dividend is limited to the amount of actual earnings and profits i.e dividend shall be limited upto $ 70000.

So Actual Dividend to Lee = $ 70,000

8) Dividend = FMV of Land - (Sale Price of Property charged from Alex + Mortgage Liability on Land)

= 12000 - (0 + 5000) = $ 7,000

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.