Question

Please show work and give an explanation Ashley, the sole shareholder of Hawk Corporation, has a...

Please show work and give an explanation

Ashley, the sole shareholder of Hawk Corporation, has a stock basis of $200,000 at the beginning of the year. On July 1, she sells all of her stock to Matt for $1 million. On January 1, Hawk has accumulated E & P of $90,000 and during the year, current E & P of $160,000. Hawk makes the following cash distributions: $270,000 to Ashley on March 31 and $90,000 to Matt on December 1. How are the distributions to Ashley and Matt taxed? What is Ashley’s recognized gain on the sale to Matt?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

ANSWER-

The 160,000 in current E&P is allocated pro rata to the two distributions made during the year, the 120,000 is allocated to Ashley and 40,000 is allocated to matt. Current E&P is allocated entirely to Ashley. The 270,000 distribution to Ashley on march 31, 210,000 is taxed as dividend income and remaining 60,00 reduces her stock basis to 140,000. She recognizes capital gain of 860,000 on the sale of her stock. The 90,000 distribution to matt, 40,000 is taxed as a dividend and the remaining 50000 reduces his base to 950,000

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
9. Ashley, the sole shareholder of Hawk Corporation, has a stock basis of $400,000 at the...
9. Ashley, the sole shareholder of Hawk Corporation, has a stock basis of $400,000 at the beginning of the year. On July 1, she sells all of her stock for $2 million to Matt (1 million) and Brody (1 million) . On January 1, Hawk has accumulated E & P of $180,000 and during the year, current E & P of $320,000. Hawk makes the following cash distributions: $270,000 to Ashley on March 31, $180,000 to Matt on October1 and...
On January 1, Reed Richards was the sole shareholder of Fantastic Deal Corporation. His stock basis...
On January 1, Reed Richards was the sole shareholder of Fantastic Deal Corporation. His stock basis was $200,000. On June 30, Fantastic distributes property to him with a FMV of $100,000 and a basis of $120,000. On July 1, he sells all of his stock to Matt Murdock for $250,000. On January 1, Fantastic had accumulated E & P of $110,000 and during the year, current E & P of $90,000. On November 1, Fantastic makes a cash distribution to...
Pete, the sole shareholder of Robin Corporation, had a basis of $120,000 in Robin stock that...
Pete, the sole shareholder of Robin Corporation, had a basis of $120,000 in Robin stock that he sold to Adam on August 1, 2019, for $180,000. Robin had accumulated E & P of $26,000 on January 1, 2019, and current E & P (for 2019) of $90,000. During 2019, Robin made the following distributions: $60,000 cash to Pete on July 1, 2019, and $120,000 to Adam on November 1, 2019. Required: a. Determine the tax consequences of the distribution to...
1. A corporation sells property (basis of $500,000) to its sole shareholder for $450,000, the fair...
1. A corporation sells property (basis of $500,000) to its sole shareholder for $450,000, the fair market value of the property. With respect to the sale: Does the corporation have a tax loss of $50,000? Why or why not? 2.MPC Corporation makes a property distribution on 12/31/16 to its sole shareholder, Jon. The property distributed is a house (fair market value of $500,000; basis of $300,000) that is subject to a $50,000 mortgage that Jon assumes. Before considering the consequences...
During the year, Chelsie, the sole shareholder of a calendar year S corporation, received a distribution...
During the year, Chelsie, the sole shareholder of a calendar year S corporation, received a distribution from the S-corp of $33,000 in cash. At the end of last year, her stock basis was $9,000. The corporation earned $11,000 ordinary income during the year. The corporation has no accumulated E & P, from prior years, but does have a beginning of the year balance in AAA of $3,000. How is the distribution to Chelsie taxed on her federal income tax return?
Albatross Corporation has a deficit in accumulated E & P of $600,000 to its sole shareholder,...
Albatross Corporation has a deficit in accumulated E & P of $600,000 to its sole shareholder, Eugene, who has a basis in his stock of $105,000. As a result of the distribution, Eugene has: A. Dividend income of $450,000 and reduces his stock basis to $55,000. B. No dividend income reduces his stock basis to zero and has a capital gain of $500,000. C. Dividend income of $105,000 and reduces his stock basis to zero. D. None of the choices....
Volunteer Corporation reported taxable income of $500,000 from operations this year. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp
Volunteer Corporation reported taxable income of $500,000 from operations this year. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The land’s fair market value was $75,000 and its tax and E&P basis to Volunteer was $25,000. Rocky assumed a mortgage attached to the land of $15,000. Any gain from the distribution will be taxed at 21 percent. The company had accumulated E&P of $750,000 at the beginning of the year.c. Compute Volunteer’s...
Please answer fully, typed if possible and show all work and relevant citations 5) Puce Corporation,...
Please answer fully, typed if possible and show all work and relevant citations 5) Puce Corporation, an accrual basis taxpayer, has struggled to survive since its formation, six years As a result, it has a deficit in accumulated E & P at the beginning of the year of $340,000. This year, however, Puce earned a significant profit, taxable income was $240,000. Consequently, Puce made two cash distributions to Martha, its sole shareholder: $150,000 on July 1 and $200,000 December 31....
2. Bob, the sole shareholder of Perez Corporation, (a regular C corporation), has the corporation pay...
2. Bob, the sole shareholder of Perez Corporation, (a regular C corporation), has the corporation pay him $100,000. You are a Tax Accountant for Perez. What would you advise Bob? 3. The tax treatment of corporate distributions at the shareholder level does not depend on: (please explain in detail) a. The character of the property being distributed. b. The earnings and profits of the corporation. c. The basis of stock in the hands of the shareholder. d. Whether the distributed...
Sparrow Corporation is a calendar year taxpayer. At the beginning of the current year, Sparrow has...
Sparrow Corporation is a calendar year taxpayer. At the beginning of the current year, Sparrow has accumulated E & P of $184,400. The corporation incurs a deficit in current E & P of $258,160 that accrues ratably throughout the year. On June 30, Sparrow distributes $110,640 to its sole shareholder, Libby. If Libby's stock has a basis of $18,440, how is she taxed on the distribution? Taxable dividend income in the amount of $ Return of capital in the amount...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT