McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 50

Volunteer Corporation reported taxable income of $500,000 from operations for 2011. The company paid federal income taxes of $170,000 on this taxable income. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The land's fair market value was $75,000 and its tax and E P basis to Volunteer was $25,000. Rocky assumed a mortgage attached to the land of $15,000. Any gain from the distribution will be taxed at 34 percent. The company had accumulated E P of $750,000 at the beginning of the year.
a. Compute Volunteer's total taxable income and federal income tax paid as a result of the distribution.
b. Compute Volunteer's current E P for 2011.c. Compute Volunteer's accumulated E P at the beginning of 2012.d. What amount of dividend income does Rocky report as a result of the distribution
e. What is Rocky's income tax basis in the land received from Volunteer