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Sergeu [11.5K]
4 years ago
14

Catamount Company had current and accumulated E&P of $585,000 at December 31, 20X3. On December 31, the company made a distr

ibution of land to its sole shareholder, Caroline West. The land's fair market value was $234,000 and its tax and E&P basis to Catamount was $292,500. The tax consequences of the distribution to Catamount in 20X3 would be:
Business
1 answer:
Nata [24]4 years ago
5 0

Answer and Explanation:

No loss will be  recognized in the year 20X3 and a provide a reduction in E&P of $292,500

Given:

Current and accumulated E&P = $585,000

Fair market value = $234,000

Profit on accumulation:

Profit on accumulation = Current and accumulated E&P - Fair market value    Profit on accumulation =  $585,000 - $234,000

Profit on accumulation =  $351,000

Distribution is divided because accumulated profit in year 20X3 is higher then distribution.

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