Reference no: EM132923119
Question - Lanco Corporation, an accrual-method corporation, reported taxable income of $2,450,000 this year. Included in the computation of taxable income were the following items:
-MACRS depreciation of $275,000. Straight-line depreciation would have been $186,000.
-A net capital loss carryover of $14,400 from last year.
-A net operating loss carryover of $28,700 from last year.
-$75,800 capital gain from the distribution of land to the company's sole shareholder (see below).Not included in the computation of taxable income were the following items:
-Tax-exempt income of $7,850.
-Life insurance proceeds of $286,000.
-Excess current-year charitable contribution of $3,400 (to be carried over to next year).
-Tax-deferred gain of $23,000 on a like-kind exchange.
-Federal income tax refund from last year of $43,800.
-Nondeductible life insurance premium of $5,400.
-Nondeductible interest expense of $3,000 on a loan used to buy tax-exempt bonds. Lanco's accumulated E&P at the beginning of the year was $3,310,000. 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 $95,500. Lanco's tax basis in the land was $19,700. Lug assumed an existing mortgage on the property of $20,700.
Required -
-Compute Lanco's current E&P.
-Compute the amount of dividend income reported by Lug Nutt this year as a result of the distributions.
-Compute Lanco's accumulated E&P at the beginning of next year.