@ bin,
For the below mentioned question, Answer from Ninja is different from Becker, which one is correct????
CPA 2015.0 – REG
Earnings and Profits, Question # 1332
Kent Corp. is a calendar-year, accrual-basis, C corporation. In 2015, Kent made a nonliquidating distribution
of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole
shareholder. The following information pertains to Kent:
Reed's basis in Kent stock at January 1, 2015 $500,000
Accumulated earnings and profits at
January 1, 2015 125,000
Current earnings and profits for 2015 including the effects of this distribution 60,000
What was taxable as dividend income to Reed for 2015?
A. $60,000
B. $150,000
C. $185,000 – Correct as per Ninja Mcqs
D. $200,000 – Correct as per Beckers
C is correct – When a corporation makes a nonliquidating distribution of property to a sole shareholder, it is considered a dividend.
Accumulated earnings and profits at January 1, 2015 $125,000
plus the current earnings and profits 60,000
——–
Total earnings and profits and maximum taxable dividend $185,000
========
The taxable dividend income to Reed for 2015 is $185,000, which is 100% of the earnings and profits of the
corporation.
However, as per beckers, answer is $200,000/- and below is the explanation.
D is correct. A dividend paid in property other than money is taxable to an individual taxpayer to the extent of the property’s FMV, but not in excess of current and Accumulated E&P of the distributing corporation. In this case, the FMV of the dividend is $200,000. It is taxable to the extent the kent had current earning ($60000) plus accumulated E&P ($125000) plus any gain generated on distribution itself ($50000), thus the dividend is taxable to the extent of $200,000/-
.