Mallard Corporation is a calendar year taxpayer formed in 20019- Mallard's E & P for each of the past 5 years is listed below. 2009 $140,000
2008 $200,000
2007 $195,000
2006 $340,000
2005 $ 80,000
Mallard Corporation made the following distributions in the previous 5 years.
2008 Land (basis of $350,000,fair market value of $400,000)
2005 $100,000 cash
Mallard's accumulated E & P as of January 1,2010 is:

Question

Quizplus · Accepted Answer

To calculate accumulated E&P, we start with the earliest year and add/subtract each year's E&P and distributions. Thus:
2005: Beginning E&P = $0, add $80,000 E&P and subtract $100,000 distribution = -$20,000
2006: Beginning E&P = -$20,000, add $340,000 E&P = $320,000
2007: Beginning E&P = $320,000, add $195,000 E&P = $515,000
2008: Beginning E&P = $515,000, add $200,000 E&P and add $400,000 FMV of land (since it's greater than basis, we add FMV) = $1,115,000
2009: Beginning E&P = $1,115,000, add $140,000 E&P = $1,255,000

Thus, Mallard Corporation's accumulated E&P as of January 1, 2010 is $475,000 (choice B).

Mallard Corporation Is a Calendar Year Taxpayer Formed in 20019-