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 37

Lanco Corporation, an accrual basis corporation, reported taxable income of $1,460,000 for 2011.Included in the computation of taxable income were the following items:
MACRS depreciation of $200,000.Straight line depreciation would have been $120,000.A net capital loss carryover of $10,000 from 2010 A net operating loss carryover of $25,000 from 2010 $65,000 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 $5,000 Life insurance proceeds of $250,000 Excess current year charitable contribution of $2,500 (to be carried over to 2012) Tax-deferred gain of $20,000 on a like-kind exchange Federal income tax refund from 2010 of $35,000 Non-deductible life insurance premium of $3,500 Non-deductible interest expense of $1,000 on a loan used to buy tax-exempt bonds Lanco paid federal income taxes for 2011 of $496,400.The company's accumulated E P at the beginning of the year was $2,400,000.During 2011, Lanco made the following distributions to its sole shareholder, Luigi (Lug) Nutt:
June 30, 2011: $50,000 September 30, 2011: Parcel of land with a fair market value of $75,000.Lanco's tax basis in the land was $10,000.Lug assumed an existing mortgage on the property of $15,000.