Asked by Junwei Zheng on Jun 05, 2024
Verified
Determine the amount of taxable dividend,return of capital,and capital gain in each of the following independent cases.
a.Corporate earnings and profits of $100,000;stockholder basis in stock of $60,000;distribution of $20,000.
b.Corporate earnings and profits of $25,000;stockholder basis in stock of $40,000;distribution of $70,000.
c.Corporate earnings and profits of $300,000;stockholder basis in stock of $450,000;distribution of $350,000.
Taxable Dividend
A dividend paid to shareholders that is subject to income taxation.
Corporate Earnings And Profits
The measure of a corporation's ability to generate income over its costs and expenses within a specific period.
Return Of Capital
A payment to investors that returns some of their original investment, thus reducing the investor's cost basis in the investment.
- Analyze dividend distributions in the context of corporate earnings and profits, stockholder basis, and determine the categorization of distributions.
Verified Answer
MC
Mahak ChhajedJun 08, 2024
Final Answer :
a.Dividend = $20,000;return of capital = $0;capital gain = $0.
b.Dividend = $25,000;return of capital = $40,000;capital gain = $5,000.
c.Dividend = $300,000;return of capital = $50,000;capital gain = $0.
b.Dividend = $25,000;return of capital = $40,000;capital gain = $5,000.
c.Dividend = $300,000;return of capital = $50,000;capital gain = $0.
Learning Objectives
- Analyze dividend distributions in the context of corporate earnings and profits, stockholder basis, and determine the categorization of distributions.