Reference no: EM132920726
Question - 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).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'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 -
-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.