Duck Corporation is a calendar year taxpayer formed in 2005.Duck's E & P for each of the past 5 years is listed below. Duck Corporation made the following distributions in the previous 5 years.
2009 Land (basis of $700,000,fair market value of $800,000)
2006 $200,000 cash
Duck's accumulated E & P as of January 1,2011 is:

Question

Duck Corporation is a calendar year taxpayer formed in 2005.Duck's E & P for each of the past 5 years is listed below.  Duck Corporation made the following distributions in the previous 5 years.
2009 Land (basis of $700,000,fair market value of $800,000)
2006 $200,000 cash
Duck's accumulated E & P as of January 1,2011 is:

Quizplus · Accepted Answer

To calculate the accumulated E&P, we start with the beginning balance, add the current year's taxable income or loss, and subtract any distributions made in the year, including non-cash distributions.

Therefore, accumulated E&P as of January 1, 2011 would be:

Beginning balance (January 1, 2006): $0
2006 taxable income: $400,000
2006 distribution: $200,000
2007 taxable income: $300,000
2008 taxable income: $150,000
2009 taxable income: $0 (no distribution)
2010 taxable income: $200,000
Total accumulated E&P as of December 31, 2010: $950,000

Note that the non-cash distribution of land in 2009 does not affect accumulated E&P since it is not considered a distribution for tax purposes unless the property's fair market value exceeds the basis.

Duck Corporation Is a Calendar Year Taxpayer Formed in 2005