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22 February, 09:53

Stacey and Andrew each own one-half of the stock in Parakeet Corporation, a calendar year taxpayer. Cash distributions from Parakeet are: $350,000 to Stacey on April 1 and $150,000 to Andrew on May 1. If Parakeet's current E & P is $60,000, how much is allocated to Andrew's distribution? Group of answer choices

1. $5,000

2. $10,000

3. $48,000

4. $150,000

5. None of the above

+1
Answers (1)
  1. 22 February, 10:09
    0
    Option 3

    Explanation:

    Earnings & profits (E&P) is the measure of a corporation's economic ability to pay dividends to its shareholders. An up-to-date E&P calculation is important for many corporate transactions, including determining whether a distribution to shareholders is a taxable dividend.

    The E&P allocated to Andrew's distribution

    = 160,000 * 150,000 / (350,000+150,000)

    = 160,000 * 150,000/500,000

    = 48,000

    Option C
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Home » Business » Stacey and Andrew each own one-half of the stock in Parakeet Corporation, a calendar year taxpayer. Cash distributions from Parakeet are: $350,000 to Stacey on April 1 and $150,000 to Andrew on May 1.
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