As of January 1,2016,Crimson Corporation,a Calendar Year C Corporation,has a Deficit

question 95

Essay

As of January 1,2016,Crimson Corporation,a calendar year C corporation,has a deficit of $300,000 in accumulated E & P.For 2016,it has current E & P of $100,000,and during the year distributes $120,000 as a dividend to the shareholders.Comment on the following assumptions.
a.The shareholders recognize no dividend income as Crimson still has negative E & P for the year of the distribution [($300,000)beginning deficit + $100,000 current E & P = ($200,000)ending deficit].
b.Crimson's accumulated E & P on January 1,2017,is ($320,000).

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