Assignment Choice 1: Earnings and Profits

For this assignment, read the scenario below and then evaluate the impact of E&P.

ABC Corporation has current E&P of ($200,000). E&P at the beginning of the year was ($100,000). ABC Corp. makes a distribution of $350,000 to its sole shareholder on the least day of the year. The shareholder had a tax basis of $50,000. Determine the following (make sure that you show all calculations):

How much of the distribution is treated like a dividend to the shareholder?

After the distribution takes place, what is the shareholder's tax basis in the ABC Corp. stock after the distribution?

What is the balance in E&P for ABC Corp. the day after the distribution?

Discuss why E&P is measured. If E&P was not measured in the scenario presented above, what are the potential problems?

Requirements:

Back up your discussion with research from two scholarly sources (you may not use the course textbook to fulfill this requirement).

Your responses to the questions above as well as your analysis should be 4-5 pages in length not counting the title and reference pages, which you must include.

Your paper must be formatted according to the CSU-Global Guide to Writing and APA Requirements.

Review the grading rubric to understand how you will be graded on this assignment. Reach out to your instructor if you have questions about the assignment.