Income is credited to its earnings and profits account

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Reference no: EM13866703

On January 2, Chaz transfers cash of $93,000 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $23,250. The income is credited to its earnings and profits account. The corporation distributes $6,975 to Chaz. If an amount is zero, enter "0".

a. Chaz has a __ (return of capital/taxable dividend) of $__ and the corporation has a deduction of $__.

b. Assume, instead, that Chaz transfers to the corporation cash of $46,500 for stock and cash of $46,500 for a note of the same amount. The note is payable in equal annual installments of $4,650 and bears interest at the rate of 6%. No distributions are made during the year to Chaz. However, at the end of the year, the corporation pays an amount to meet the loan obligation.

Chaz interest of $__ and a note repayment of $__ of which $__ is taxable to Chaz. The corporation has a deduction of $__ .

Reference no: EM13866703

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