[jeff]

Free Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/

Free CPA Exam Survival Guide: https://www.another71.com/cpa-exam-survival-guide/

Post by Another71.

[moreinfo2013]

@ Corp

When Current E&P number is positive and the Accumulated E&P number is positive as well, you add those two numbers and that is the dividend amount that is the taxable portion. So in this case – $25 is the taxable portion of the dividend. March portion of $20 therefore is totally taxable and out of the July only the remaining amount of $5 is taxable. The rest of $15 is return of capital.

[wmcpa]

I'm confused too. I thought the dividend income, return of capital, and capital gain was dependent on s/h basis as well. Also, I thought there was some type of ratio involved between current and accumulated E&P when distribution is made in multiple increments, but during the same period.

FAR: 83
REG: 69, 69, retake Q1 2015
AUD: Q2 2015
BEC: Q2 2015

[moreinfo2013]

@wmcpa

The example above referred to a C Corp. You are confused because you are thinking of a S Corp that was initially a C Corp and had accumulated E&P.

[wmcpa]

gah– I need to review and feel confident about distributions.

FAR: 83
REG: 69, 69, retake Q1 2015
AUD: Q2 2015
BEC: Q2 2015

[rachel525]

Paul Pappas owns all of the stock of an S corporation which had previously been a C corporation. The S corporation had the following balances at the beginning of its tax year:

Accumulated adjustments account $ 8,000

Accumulated earnings and profits 10,000

Paul's stock basis was $20,000 at the beginning of the tax year. The S corporation made a distribution of $19,000 to Paul during the year. What amount of the distribution is taxable to Paul?

I don't understand why the answer is 10,000

[wmcpa]

@rachel – I *cheated* – I looked up in R3 of Becker –

For S-corp with c-corp e&p:

The distribution:

1st – to extent of AAA – in this case $8K (not subject to tax), so now $11K would be remaining.

2nd – to extent of c-corp e&p – in this case $10K – taxed as a dividend, does not reduce basis of stock – old c-corp taxable dividend

3rd – to extent of basis of stock – in this case $1K (not subject to tax, reduces basis of stock – return of capital)

FAR: 83
REG: 69, 69, retake Q1 2015
AUD: Q2 2015
BEC: Q2 2015

[Anonymous]

I think my hang up is that the current year E&P was not earned until year end. Or more specifically it could not be determined until year end, but the distributions were made prior to year end? i'm guessing by your explanation that the timing of the distribution is a moot point.

@wmcpa- I'm with you. I thought you used the ratio.

[Anonymous]

Last time I took REG I had an AAA sim. Only used Becker to study and the explanation within the lecture is very brief, so I undoubtly missed that one. Funny thing is, I was reviewed with some people the night before and we got to AAA and I think we were all in agreement it wasn't likely to be tested…. They showed us! Oops!

[jeff]

MCQ users – NINJA Chat is live: https://www.another71.com/cpa-exam-forum/topic/ninja-chat-is-live

[nevertoolate]

Thanks, Jeff!!! Awesome is an understatement!

REG - 68, 81
FAR - June 2016
AUD - 58, 63, 84
BEC - 71, 79

CPAexcel (Gold), Ninja Audio, and Ninja MCQ

"Beware; for I am fearless, and therefore powerful"

[Anonymous]

Thanks @moreinfo! Your explanation was extremely helpful. I was looking at it from the standpoint of the entire year. The call of the question is just looking at July. No telling how many questions I miss because I dont completely read them. Oops

[Anonymous]

Quigley, Roberk, and Storm form a corporation. Quigley exchanges $25,000 of legal fees for 30 shares of stock. Roberk exchanges land with a basis of $10,000 and a fair market value of $100,000 for 60 shares of stock. Storm exchanges $10,000 cash for 10 shares of stock. What amount of income should each shareholder recognize?

I know the $25,000 is taxable, as its services.

But I dont understand how contributing property is a taxable event?

[Anonymous]

@ Corporette… This MC is very Tricky.

First, you should note the shares of each stockholder.

Quick: 30%= Basis is $25,000 because was in exchange of a service

Robert: 60%= Basis $10,000

Storm: 10%= Basis = $10,000

However, if we exclude Quick, because he provided a service, the remainder percentage of ownership es 70%, which is less than 80% that you need to do not create a taxable( this is the rule). As such, due to the 70%, a taxable event is create as follow:

Quick= $25,000 taxable

Robert: $100,000 (FMV)- $10,000 (Basis)= $90,000 Taxable

Storm= $0 (because was in exchange of cash only)

Hopefully, this could help you to understand better.

[Anonymous]

Wow! Thanks @boricuainthehouse. Soooo many rules to remember.

[funtiks]

@gabe,

I meant say I have 10k of education expenses.

Can i take the $4000 deduction + one of the credits? or its pick one or the other?

FAR - 76*, 73, 85
BEC - 69, 72, 78*, 80
AUD - 72, 71, 90
REG - 71, 74, 85

AFTER 3 YEARS I'M DONE!!!

[Author]

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