McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 45

Hawkeye Company reports current E P of $300,000 in 2011 and accumulated E P at the beginning of the year of $200,000.Hawkeye distributed $400,000 to its sole shareholder, Ray Kinsella, on December 31, 2011.Ray's tax basis in his Hawkeye stock is $75,000.a.How much of the $400,000 distribution is treated as a dividend to Ray?
b.What is Ray's tax basis in his Hawkeye stock after the distribution?
c.What is Hawkeye's balance in accumulated E P as of January 1, 2012?