As of January 1, 2017, Crimson Corporation, a calendar year C corporation, has a deficit of $300,000 in accumulated E & P. For 2017, it has current E & P of $100,000, and during the year distributes $120,000 as a dividend to the shareholders. Comment on the following assumptions.
a.The shareholders recognize no dividend income as Crimson still has negative E & P for the year of the distribution [($300,000) beginning deficit + $100,000 current E & P = ($200,000) ending deficit].
b.Crimson's accumulated E & P on January 1, 2018, is ($320,000).

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The Answer of As of January 1, 2017, Crimson Corporation, a calendar year C corporation, has a deficit of $300,000 in accumulated E & P. For 2017, it has current E & P of $100,000, and during the year distributes $120,000 as a dividend to the shareholders. Comment on the following assumptions.
a.The shareholders recognize no dividend income as Crimson still has negative E & P for the year of the distribution [($300,000) beginning deficit + $100,000 current E & P = ($200,000) ending deficit].
b.Crimson's accumulated E & P on January 1, 2018, is ($320,000).

As of January 1, 2017, Crimson Corporation, a Calendar Year