Lanco Corporation, an accrual-method corporation, reported taxable income of $2,280,000 this year. Included in the computation of taxable income were the following items:
MACRS depreciation of $229,500. Depreciation for earnings and profits purposes is $144,000.
A net capital loss carryover of $22,700 from last year.
A net operating loss carryover of $24,000 from last year.
$78,150 capital gain from the distribution of land to the company's sole shareholder (see below).
Not included in the computation of taxable income were the following items:
Tax-exempt income of $6,900.
Life insurance proceeds of $329,000.
Excess current-year charitable contribution of $4,200 (to be carried over to next year).
Tax-deferred gain of $29,800 on a like-kind exchange.
Nondeductible life insurance premium of $3,200.
Nondeductible interest expense of $3,300 on a loan used to buy tax-exempt bonds.
Lanco accrued and paid federal income taxes this year of $478,800. Lanco's accumulated E&P at the beginning of the year was $3,350,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi:
June 30: $69,500.
September 30: Parcel of land with a fair market value of $97,750. Lanco's tax basis in the land was $19,600. Luigi assumed an existing mortgage on the property of $17,200.
Required:
Compute Lanco's current E&P.
Compute the amount of dividend income reported by Luigi this year as a result of the distributions.
Compute Lanco's accumulated E&P at the beginning of next year.
