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

question 20

Essay

Austin Company reports positive current E&P of $200,000 and negative accumulated E&P of $300,000.Austin distributed $250,000 to its sole shareholder,Betsy Bevo,on December 31,year 1.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:

Risk Management

The process of identifying, assessing, and controlling threats to an organization's capital and earnings.

Passive Investment

An investment strategy involving minimal buying and selling actions, typically focused on long-term investment in index funds and ETFs.

Target Date Fund

A mutual fund designed to adjust its asset allocation towards more conservative investments as it approaches a specific target date.

Variable Annuity

An insurance product that provides a retirement income and whose value fluctuates with the performance of the investment options chosen by the holder.