Question

On January 1 of the current year, Rhondell Corporation has accumulated E & P of $112,000. Current E & P for the year is $336,000, earned evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $179,200 ($89,600 to Elizabeth and $89,600 to Jonathan) on April 30 and a total of $313,600 ($156,800 to Jonathan and $156,800 Marshall) on December 31. Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in their stock for any amount that is treated as return of capital. If an amount is zero, enter "0". If required, round any division to two decimal places and use in subsequent computations. Round final answers to the nearest dollar.

April 30 distribution of $179,200

1. From Current E & P 2.From Accumulated E & P 3.Treated as Return of Capital

December 31 distribution of $313,600

1.From Current E & P 2.From Accumulated E & P 3.Treated as Return of Capital

Answer 1

Total distribution: 179200 +313600 = 492800

	From current E & P	From accumulated E & P	Treated as return on capital
April 30 distribution	12218	57018	0
December 31 distribution	336000-122182= 213818	112000-57018= 54982	313600-213818-54982= 44800

**current E & P (April 30 distribution) = current earning * April distribution /total distribution

                    = 336000* 179200/492800

                                                                     = 122182

Accumulated E& p= 179200-122182

         =57018