Miester Corporation had the following results for 2015: Dividends received from
ID: 2426525 • Letter: M
Question
Miester Corporation had the following results for 2015:
Dividends received from 30-percent-owned domestic corporation
$ 80,000
Gross receipts from operations
260,000
Operating expenses, including $30,000 of straight-line depreciation
140,000
Capital losses
90,000
Interest on State of Wyoming bonds
15,000
There was a deficit of $43,000 in accumulated E&P on December 31, 2014. During 2015, Miester Corporation distributed $100,000 to its shareholders. Showing all necessary computations, determine the tax consequences of the distribution. Also, determine accumulated E&P on December 31, 2015.
Dividends received from 30-percent-owned domestic corporation
$ 80,000
Gross receipts from operations
260,000
Operating expenses, including $30,000 of straight-line depreciation
140,000
Capital losses
90,000
Interest on State of Wyoming bonds
15,000
Explanation / Answer
The amount of accumulated E&P (Earnings & Profit) is usually the amount of E&P at the end of the preceding tax year.
Accumulated E&P (beginning year)
+/-
Current E&P
–
Distributions from current E&P
–
Distributions from accumulated E&P
=
Accumulated E&P at end of year
= -43000-$90000+ $100000
= $-33000