Monal Corporation merged with Bobwhite Corporation two years ago. At the time of the merger, Monal held an earnings and profits (E & P) deficit of $250,000 and Bobwhite had a positive E & P of $200,000. Last year's current E & P was $ 100,000 for the successor company. Despite having only $10,000 E & P for the current year, Monal makes a distribution to its shareholders of $270,000. How is the distribution taxed to the shareholders?
A)$270,000 is taxable.
B)$200,000 is taxable.
C)$110,000 is taxable.
D)$50,000 is taxable.
E)None of the above amounts is correct.

Question

Quizplus · Accepted Answer

The Answer of Monal Corporation merged with Bobwhite Corporation two years ago. At the time of the merger, Monal held an earnings and profits (E & P) deficit of $250,000 and Bobwhite had a positive E & P of $200,000. Last year's current E & P was $ 100,000 for the successor company. Despite having only $10,000 E & P for the current year, Monal makes a distribution to its shareholders of $270,000. How is the distribution taxed to the shareholders?
A)$270,000 is taxable.
B)$200,000 is taxable.
C)$110,000 is taxable.
D)$50,000 is taxable.
E)None of the above amounts is correct.

Monal Corporation Merged with Bobwhite Corporation Two Years Ago