Question

Stacey and Andrew each own one-half of the stock in Parakeet Corporation, a calendar year taxpayer. Cash distributions from Parakeet are: $350,000 to Stacey and $150,000 to Andrew. If Parakeet’s current E&P is $160,000, how much current E&P is allocated to Andrew’s distribution?

Question 8 options:

$5,000

$10,000

$48,000

$150,000

None of the above.

Answer 1

Answer:

$48,000

Explanation:

E&P allocate for  Andrew's distribution

= 160,000 * 150,000/(350,000+150,000)

= 160,000 * 150,000/500,000

= 48,000

The correct answer is $48,000