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

Exercise 19

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?