Elk Company Reports Negative Current E&P of $200,000 and Positive

question 1

Essay

Elk Company reports negative current E&P of $200,000 and positive accumulated E&P of $300,000. Elk distributed $200,000 to its sole shareholder, Barney Rubble, on December 31, 20X3. Barney's tax basis in his Elk stock is $75,000. What is the tax treatment of the distribution to Barney and what is his tax basis in Elk stock after the distribution?

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Definitions:

Cash Receipts Journal

An accounting ledger that tracks all cash inflows or receipts of a business over a period.

Debit To Cash

An accounting entry that increases the cash balance in the company's ledger.

Collections From Customers

The process of receiving payments from customers for goods or services provided or sold.

Control Accounts

General ledger accounts that summarize and control the total of individual accounts found in subsidiary ledgers.