ts (AEP) ($600,000) Current Earnings and Profits $ 70,000 On December 31, 2021, Wineseller Corporation distribut
ts (AEP) ($600,000) Current Earnings and Profits $ 70,000 On December 31, 2021, Wineseller Corporation distribut
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 30P
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Question
Wineseller Corporation is owned by Mortimer Smith, its sole shareholder. Mortimer has a $20,000 basis in his Wineseller Corporation stock. Mortimer is in the 37% tax bracket. Wineseller Corporation is in the 21% tax bracket.
Wineseller Corporation has the following balances as of December 31, 2021.
Accumulated Earnings and Profits (AEP) ($600,000)- Current Earnings and Profits $ 70,000
On December 31, 2021, Wineseller Corporation distributes $160,000 to Mortimer.
What are the tax consequences to Mortimer from receiving this distribution from Wineseller Corporation?
- Use the facts in part a, but assume that rather than cash, Mortimer received an asset with a fair market value of $200,000 and a basis to the corporation of $120,000.
- How much tax would Mortimer owe from this distribution?
- What are the tax implications to Wineseller Corporation?
- How much tax would Mortimer owe from this distribution?
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