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:

Cognitive Systems

Complex systems that involve thought, perception, memory, and decision-making processes within the brain.

Projection

A psychological defense mechanism where individuals attribute their own unacceptable thoughts, feelings, or motives to another person.

Superego

In psychoanalytic theory, the part of the personality that represents moral standards, conscience, and the ideal self.

Autonomous Morality

A stage of moral development in which individuals recognize the fluidity of rules and consider intentions and consequences.