Question

Tiger Company, a calendar year corporation, reports a deficit in current E&P of negative ($500,000) this...

Tiger Company, a calendar year corporation, reports a deficit in current E&P of negative ($500,000) this year and positive accumulated E&P at the beginning of the year of $300000. Tiger distributed $250000 to its sole shareholder on June 30 of this year. How much of the distribution is treated as a return of capital this year if the shareholder has a $1 million adjusted basis in Tiger stock?

Multiple Choice

$500000

$50000

$200000

$0

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Homework Answers

Answer #1
Dividend distributed on June30 2,50,000
Deficit in Current E&P -5,00,000
Proporitonate defict in Current E &P till June30 -2,50,000
Balance in Accumulated E & P 3,00,000
Less: Proportionate deficit in Current E &P -2,50,000
balance in Accumulated E & P after adjustment used for dividend 50,000
(Treated as dividend distribution)
Total Amount distributed 2,50,000
Less: Dividend distribution to be extent of balance of Acc. Earnings -50,000
Return of capital 2,00,000
Answer is $ 200,000
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