What is ocean current earnings and profits

Reference no: EM132217946

Question - Ocean Corporation has two equal shareholders - Moana and Maui. At January 1 2018 Moana and Maui each have a basis in the corporation of $100,000. During 2018 Ocean Corporation had the following items of income (before considering any distributions):

Gross Receipts 200,000

Non-deductible expenses (30,000)

Other operating expenses (100,000) (Assume all deductible)

Book Income 70,000

On March 1, Ocean Corporation distributed cash of $50,000 to each Moana and Maui (total distributions of $100,000). On June 1 Moana sold all her stock in Ocean Corporation to Pua for $200,000. On September 1 Maui Corporation made another cash distribution of $50,000 to Pua and distributed property to Maui with a fair market value (FMV) of $50,000, and a basis of $40,000 (total FMV of all September 1 distributions was $100,000). At January 1, 2018, Ocean corporation had $100,000 in accumulated earnings and profits.

A. What is Ocean's taxable income for 2018?

B. What is Ocean's current earnings and profits for 2018?

C. What are the tax consequences to Moana as a result of the March 1 distribution?

D. What are the tax consequences to Moana as a result of the June 1 sale?

E. What are the tax consequences to Maui as a result of the September 1 distribution?

F. What are the tax consequences to Pua as a result of the September 1 distribution?

G. What is Ocean's accumulated earnings and profits at January 1, 2019?

Assumptions: Use a flat corporate tax rate of 21% for all problems. Assume a tax rate of 15% for all dividends and capital gains. Assume there is no Alternative Minimum Tax for these problems. Assume that all entities are US domestic corporations, taxed under Subchapter C of the IRC unless otherwise noted. The internal revenue code.

Reference no: EM132217946

Questions Cloud

Key role which are important for organisation : Discuss the key role which are important for an organisation to involve before restructuring or when planning for restructuring.

Operation strategy in global environment : Write a page report in defining Operation Strategy in a Global Environment, give an example and why it is important to an operation manager.

How an organization can expand the knowledge : Organizational development looks at how an organization can expand the knowledge and effectiveness of its people to be a more successful organization.

Write a short essay on that job prospect : Select a career path in psychology that interests you, or is one that you want to know more about, and write a short essay on that job prospect.

What is ocean current earnings and profits : On March 1, Ocean Corporation distributed cash of $50,000 to each Moana and Maui. What is Ocean's current earnings and profits for 2018

Discuss how you would handle a toxic leader : Oftentimes, the words coaching and mentoring are interspersed in the literature. Coaching of employees can be beneficial to an organization's success.

How does the quote relate to our topic : How does this quote relate to our topic of the psychological basis of involvement in exercise and physical activity in terms of the material covered in Chapter.

Show the payment for the one-year lease : Required - Show the payment for the one-year lease and the related adjusting entry to recognize rent expense in the accounting equation

What makes it interesting from an operations management : What do you already know about this topic and what research questions do you expect to answer?

User Account

All Pages