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 58

Illini 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 an automobile to its sole shareholder, Carly Urbana. The auto's fair market value was $30,000 and its tax basis to Illini was $0. The auto's E P basis was $15,000. Any gain from the distribution will be taxed at 34 percent. Illini had accumulated E P of $1,500,000.
a. Compute Illini's total taxable income and federal income tax paid as a result of the distribution.
b. Compute Illini's current E P for 2011.c. Compute Illini's accumulated E P at the beginning of 2012.d. What amount of dividend income does Carly report as a result of the distribution
e. What is Carly's tax basis in the auto she received from Illini