Aggie Corporation made a distribution of $514,000 to Rusty Cedar in partial liquidation of the company on December 31 of this year. Rusty, an individual, owns 100 percent of Aggie Corporation. The distribution was in exchange for 50 percent of Rusty’s stock in the company. At the time of the distribution, the shares had a fair market value of $159 per share. Rusty’s income tax basis in the shares was $35 per share. Aggie had total E&P of $8,480,000 at the time of the distribution.
b. Assuming Aggie made no other distributions to Rusty during the year, by what amount does Aggie reduce its total E&P as a result of the partial liquidation?
b. Assuming Aggie made no other distributions to Rusty during the year, by what amount does Aggie reduce its total E&P as a result of the partial liquidation?
Aggie Corporation made a distribution of $514,000 to Rusty Cedar in partial liquidation of the company on December 31 of this year. Rusty, an individual, owns 100 percent of Aggie Corporation. The distribution was in exchange for 50 percent of Rusty’s stock in the company. At the time of the distribution, the shares had a fair market value of $159 per share. Rusty’s income tax basis in the shares was $35 per share. Aggie had total E&P of $8,480,000 at the time of the distribution.
b. Assuming Aggie made no other distributions to Rusty during the year, by what amount does Aggie reduce its total E&P as a result of the partial liquidation?
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Related questions
Thriller Corporation has one class of voting common stock, of which 1,000 shares are issued and outstanding. The shares are owned as follows:
| Joe Jackson | 400 |
| Mike Jackson (Joeâs son) | 200 |
| Jane Jackson (Joeâs daughter) | 200 |
| Vinnie Price (unrelated) | 200 |
| Total | 1,000 |
Thriller Corporation has current E&P of $300,000 for this year and accumulated E&P at January 1 of this year of $500,000.
During this year, the corporation made the following distributions to its shareholders:
03/31: Paid a dividend of $10 per share to each shareholder ($10,000 in total).
06/30: Redeemed 200 shares of Joeâs stock for $200,000. Joeâs basis in the 200 shares redeemed was $100,000.
09/30: Redeemed 60 shares of Vinnieâs stock for $60,000. His basis in the 60 shares was $36,000.
12/31: Paid a dividend of $10/share to each shareholder ($7,400 in total).
Compute the corporationâs accumulated E&P at January 1 of next year. (Round all intermediate calculations to 2 decimal places. Round final answers to the nearest dollar amount.)
