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

question 97

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, 20X3. Betsy' 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?

---

Definitions:

Social Security System

A government program designed to provide financial support to individuals during retirement, disability, or unemployment.

Employee Retirement Income Security Act (ERISA)

A federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.

Mandated Benefit

Benefits that employers are required by law to provide to their employees, such as social security, unemployment, and workers' compensation.

Workers' Compensation

An insurance type that offers medical benefits and compensates for lost wages to workers hurt while performing their job duties.