Austin Company Reports Positive Current E&P of $200,000 and a Deficit

question 45

Essay

Austin Company reports positive current E&P of $200,000 and a deficit in accumulated E&P of ($300,000). Austin distributed $250,000 to its sole shareholder, Betsy Bevo, on December 31, 20X3. Betsy's tax basis in her stock is $125,000. How much of the $250,000 distribution is treated as a dividend to Betsy, and what is her tax basis in Austin stock after the distribution?

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Definitions:

Glycolysis

The metabolic pathway that breaks down glucose to pyruvate, releasing energy and forming ATP, occurring in the cytoplasm of cells.

Basal Bodies

Microtubule-organizing centers found at the base of cilia or flagella in eukaryotic cells, crucial for their growth and function.

Mitochondria

Organelles found in the cytoplasm of eukaryotic cells that produce energy through cellular respiration, often referred to as the powerhouses of the cell.

Hydrolytic Enzymes

Enzymes that catalyze the cleavage of bonds in molecules through the addition of water.