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 62

Beaver 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, Eugenia VanDam. The land's fair market value was $20,000 and its tax and E P basis to Beaver was $50,000. Eugenia assumed a mortgage on the land of $25,000. Any gain from the distribution will be taxed at 34 percent. Beaver Corporation had accumulated E P of $1,500,000.
a. Compute Beaver's total taxable income and federal income tax paid as a result of the distribution.
b. Compute Beaver's current E P for 2011.c. Compute Beaver's accumulated E P at the beginning of 2012.d. What amount of dividend income does Eugenia report as a result of the distribution
e. What is Eugenia's income tax basis in the land received from Beaver