25 May Question 1. Tungsten Corporation, a calendar year cash basis taxpayer, ma
Question
1. Tungsten Corporation, a calendar year cash basis taxpayer, made estimated tax payments of $800 each quarter in 2014, for a total of $3,200. Tungsten filed its 2014 tax return in 2015 and the return showed a tax liability $4,200. At the time of filing, March 15, 2015, Tungsten paid an additional $1,000 in Federal income taxes. How does the additional payment of $1,000 impact Tungsten’s E & P?
a. Increase by $1,000 in 2014.
b. Increase by $1,000 in 2015.
c. Decrease by $1,000 in 2014.
d. Decrease by $1,000 in 2015.
e. None of the above.
2. Cedar Corporation is a calendar year taxpayer formed in 2010. Cedar’s E & P for each of the past 5 years is listed below.
| 2014 | $28,000 |
| 2013 | $40,000 |
| 2012 | $39,000 |
| 2011 | $68,000 |
| 2010 | $16,000 |
Cedar Corporation made the following distributions in the previous 5 years.
2013 Land (basis of $70,000, fair market value of $80,000)
2010 $20,000 cash
Cedar’s accumulated E & P as of January 1, 2015 is:
a. $91,000.
b. $95,000.
c. $101,000.
d. $105,000.
e. None of the above.
3. Stacey and Andrew each own one-half of the stock in Parakeet Corporation, a calendar year taxpayer. Cash distributions from Parakeet are: $350,000 to Stacey on April 1 and $150,000 to Andrew on May 1. If Parakeet’s current E & Pis $60,000, how much is allocated to Andrew’s distribution?
a. $5,000.
b. $10,000.
c. $18,000.
d. $30,000.
e. None of the above.
4. Maria and Christopher each own 50% of Cockatoo Corporation, a calendar year taxpayer. Distributions from Cockatoo are: $750,000 to Maria on April 1 and $250,000 to Christopher on May 1. Cockatoo’s current E & P is $300,000 and its accumulated E & P is $600,000. How much of the accumulated E & Pis allocated to Christopher’s distribution?
a. $0.
b. $75,000.
c. $150,000.
d. $300,000.
e. None of the above.
5. Robin Corporation, a calendar year taxpayer, has a deficit in current E & P of $200,000 and a $580,000 positive balance in accumulated E & P. If Robin determines that a $700,000 distribution to its shareholders is appropriate at some point during the year, what is the maximumamount of the distribution that could potentially be treated as a dividend?
a. $0.
b. $380,000.
c. $480,000.
d. $580,000.
e. None of the above.
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