Questions -

Q1. Tugboats Corporation, a calendar year corporation that began doing business on January 1, 2005, had $35,000 in accumulated earnings and profits on January 1, 2011. Tugboats had an operating loss of $60,000 for the fi rst six months of 2011, but had $10,000 in earnings for the entire year. Tugboats made a distribution of $25,000 cash to its stockholders on April 1, 2011. What is the amount of Tugboat's accumulated earnings and profits on January 1, 2012?

$0

$10,000

$20,000

$45,000

Q2. Ten years ago, Lisa Bara acquired a one-third interest in Dee Associates, a partnership. This year, when Lisa's entire interest in the partnership was liquidated, Dee's assets consisted of the following: cash, $20,000; tangible property with a basis of $46,000, and a fair market value of $40,000. Dee had no liabilities. Lisa's adjusted basis for her one-third interest was $22,000. Lisa received cash of $20,000 in complete liquidation of her entire interest. How much loss will Lisa recognize upon receipt of the liquidating distribution?

$0

$2,000 short-term capital loss

$2,000 long-term capital loss

$2,000 ordinary loss