ACC 317 Week 4 Chapter 18 homework

Lanco Corporation, an accrual-method corporation, reported taxable income of $1,460,000 this year. Included in the computation of taxable income were the following items:
 

• MACRS depreciation of $200,000. Straight-line depreciation would have been $120,000.
• A net capital loss carryover of $10,000 from last year.
• A net operating loss carryover of $25,000 from last year.
• $65,000 capital gain from the distribution of land to the company’s sole shareholder (see below).

https://hwacer.com/Tutorial/acc-317-week-4-chapter-18-homework/

Not included in the computation of taxable income were the following items:
 

• Tax-exempt income of $5,000.
• Life insurance proceeds of $250,000.
• Excess current year charitable contribution of $2,500 (to be carried over to next year).
• Tax-deferred gain of $20,000 on a like-kind exchange.
• Federal income tax refund from last year of $35,000.
• Nondeductible life insurance premium of $3,500.
• Nondeductible interest expense of $1,000 on a loan used to buy tax-exempt bonds.

Lanco paid federal income taxes this year of $496,400. The company’s accumulated E&P at the beginning of the year was $2,400,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi (Lug) Nutt:
 

• June 30: $50,000.
• September 30: Parcel of land with a fair market value of $75,000. Lanco’s tax basis in the land was $10,000. Lug assumed an existing mortgage on the property of $15,000.

Required:

1. Compute Lanco’s current E&P.
2. Compute the amount of dividend income reported by Lug Nutt this year as a result of the distributions.
3. Compute Lanco’s accumulated E&P at the beginning of next year.

Q

Gopher Corporation reported taxable income of $500,000 this year. Gopher paid a dividend of $100,000 to its sole shareholder, Sven Anderson. Gopher Corporation is subject to a flat-rate tax of 34 percent. The dividend meets the requirements to be a qualified dividend, and Sven is subject to a tax rate of 15 percent on the dividend. What is the income tax imposed on the corporate income earned by Gopher and the income tax on the dividend distributed to Sven?

Q

Oriole Corporation, a privately held company, has one class of voting common stock, of which 1,000 shares are issued and outstanding. The shares are owned as follows:

Larry Byrd	400
Paul Byrd (Larry’s son)	200
Lady Byrd (Larry’s daughter)	200
Cal Rifkin (unrelated)	200
Total	1,000

Larry is considering retirement and would like to have the corporation redeem all of his shares for $400,000.

Oriole Corporation proposes to pay Larry $100,000 and give him an installment note that will pay him $30,000 per year for the next 10 years plus a market rate of interest. Will this arrangement allow Larry to treat the redemption as an exchange? Consult §453(k)(2)(A).

Q

Spartan Corporation redeemed 25 percent of its shares for $2,000 on July 1 of this year, in a transaction that qualified as an exchange under §302(a). Spartan’s accumulated E&P at the beginning of the year was $2,000. Its current E&P is $12,000. Spartan made dividend distributions of $1,000 on June 1 and $4,000 on August 31. Determine the beginning balance in Spartan’s accumulated E&P at the beginning of the next year. See Rev. Rul. 74-338, 1974-2 C.B. 101, and Rev. Rul. 74-339, 1974-2 C.B. 103, for help in making this calculation.

Q

Bulldog Corporation reported taxable income of $500,000 this year, before any deduction for any payment to its sole shareholder and employee, Georgia Brown. Bulldog chose to pay a bonus of $100,000 to Georgia at year-end. Bulldog Corporation is subject to a flat-rate tax of 34 percent. The bonus meets the requirements to be “reasonable” and is therefore deductible by Bulldog. Georgia is subject to a marginal tax rate of 35 percent on the bonus. What is the income tax imposed on the corporate income earned by Bulldog and the income tax on the bonus paid to Georgia?

ACC 317 Week 4 Chapter 18 homework Lanco Corporation, an accrual-method corporation, reported taxable income of $1,460,000 this year. Included in the comput