Lone Star Company is a calendar-year corporation, and this year Lone Star reported $100,000 in current E&P that accrued evenly throughout the year. At the beginning of the year, Lone Star's accumulated E&P was $12,000. At the beginning of the year, Lone Star's sole shareholder was Matt. Lone Star declared $30,000 in cash distributions on each of the following dates: March 31, June 30, September 30, and December 31. Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign. a. How much of the $120,000 in total distributions will be treated as dividends? b. Suppose that Matt sold half of the shares to Chris on June 1 for $40,000. How much dividend income will Matt recognize this year? Answer is complete but not entirely correct. Dividend recognized $ 35,714 X c. If Matt's basis in the Lone Star shares was $7,000 at the beginning of the year, how much capital gain will he recognize on the sale and distributions from Lone Star? Capital gain recognized on the sale and distribution

SWFT Comprehensive Vol 2020
43rd Edition
ISBN:9780357391723
Author:Maloney
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Chapter22: S Corporations
Section: Chapter Questions
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Lone Star Company is a calendar-year corporation, and this year Lone Star reported $100,000 in current E&P that accrued
evenly throughout the year. At the beginning of the year, Lone Star's accumulated E&P was $12,000. At the beginning of
the year, Lone Star's sole shareholder was Matt. Lone Star declared $30,000 in cash distributions on each of the following
dates: March 31, June 30, September 30, and December 31.
Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.
a. How much of the $120,000 in total distributions will be treated as dividends?
b. Suppose that Matt sold half of the shares to Chris on June 1 for $40,000. How much dividend income will Matt recognize this year?
Answer is complete but not entirely correct.
Dividend recognized
$ 35,714 X
c. If Matt's basis in the Lone Star shares was $7,000 at the beginning of the year, how much capital gain will he recognize on the sale
and distributions from Lone Star?
Capital gain recognized on the sale and distribution
Transcribed Image Text:Lone Star Company is a calendar-year corporation, and this year Lone Star reported $100,000 in current E&P that accrued evenly throughout the year. At the beginning of the year, Lone Star's accumulated E&P was $12,000. At the beginning of the year, Lone Star's sole shareholder was Matt. Lone Star declared $30,000 in cash distributions on each of the following dates: March 31, June 30, September 30, and December 31. Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign. a. How much of the $120,000 in total distributions will be treated as dividends? b. Suppose that Matt sold half of the shares to Chris on June 1 for $40,000. How much dividend income will Matt recognize this year? Answer is complete but not entirely correct. Dividend recognized $ 35,714 X c. If Matt's basis in the Lone Star shares was $7,000 at the beginning of the year, how much capital gain will he recognize on the sale and distributions from Lone Star? Capital gain recognized on the sale and distribution
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