Required information [The following information applies to the questions display

Question

Required information [The following information applies to the questions displayed below. The following information applies to the questions displayed below This year, Sooner Company reports current E&P; of negative $300,000. Its accumulated E&P; at the beginning of the year was $200,000. Sooner distributed $400,000 to its sole shareholder, Boomer Wells, on June 30 of this year. Boomer's tax basis in his Sooner stock is $75,000. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.) a. How much of the $400,000 distribution is treated as a dividend to Boomer? Dividend

Explanation / Answer

Number of days between Jan to June 30 = 181 days

The deficit Current E & P = - $ 300,000

Note : Current E & P is to be allocated on daily pro rata basis.

The deficit Current E & P as on June 30 = - $ 300,000 * 181 / 365 = $148,767

Amount treated as Dividend to Boomer = $200,000 - $148,767 = $51,233

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