Problem 19-32 (Algorithmic) (LO. 1, 4) At the start of the current year, Blue Co
ID: 2532460 • Letter: P
Question
Problem 19-32 (Algorithmic) (LO. 1, 4)
At the start of the current year, Blue Corporation (a calendar year taxpayer) has accumulated E & P of $365,000. Blue's current E & P is $219,000, and at the end of the year, it distributes $730,000 ($365,000 each) to its equal shareholders, Pam and Jon. Pam's stock basis is $51,100; Jon's stock basis is $204,400. How is the distribution treated for tax purposes?
If an amount is zero, enter "0".
Each shareholder has dividend income of $________. In addition, Pam has a reduction in stock basis to $and a capital gain of $_______. Jon has a reduction in stock basis to $________.
Explanation / Answer
Each shareholder has dividend income of $292,000. In addition, Pam has a reduction in stock basis to 0$ and a capital gain of 21,900. Jon has a reduction in stock basis to $131,400.
Blue corporation accumulated earnings E & P $365,000 current E & P $219,000 Total E & P $584,000 upto which distribution is treated as divdend distribution Distribution $730,000 Pam Jon Total Distribution $365,000 $365,000 $730,000 Dividend 292000 292000 $584,000 Excess over Dividend $73,000 $73,000 $146,000 Less: Stock Basis 51100 204400 capital gain/new stock basis $21,900 $ 131,400 Capital Gain Stock Basis