Reference no: EM131735988

Question 1 - Flash Co., distributed $40,000 to Skip Inc., a 25 percent shareholder. Flash Co.'s E&P applicable to Skip Inc.'s distribution is $20,000 and Skip Inc., had a basis in its stock of $14,000.

A) How much dividend income does Skip Inc. have?

B) How much and what kind of taxable income does Skip Inc. have because of the distribution?

C) What is Skip Inc.'s basis in its stock immediately after the distribution?

Question 2 - Bill incorporated his business four years ago and owns 100 percent of its stock. The corporation distributes a piece of land, used as a parking lot for the customers, to Bill. Bill's basis in his stock is $21,000, the land has a basis of $7,000 and a value of $24,000, and E&P is $5,000.

a) What are the tax consequences to the corporation?

b) To Bill?