3.3 Dividends Allocation of Earnings and Profits On January 1, 20x8, Tree Corporation...
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3.3 Dividends Allocation of Earnings and Profits On January 1, 20x8, Tree Corporation was owned by one individual, Forest. At January 1, 20x8 Forest had a basis of $10,000 in his stock in Tree Corporation. At January 1, 20x8, Tree Corporation had positive accumulated earnings and profits of $100,000. For the 20x8 year, Tree Corporation had negative earnings and profits of $50,000. On March 1, 20x8, Tree Corporation distributed $50,000 in cash to Forest. On October 1, 20x9, Tree Corporation distributed $20,000 in Cash to Forest. a) What are the tax consequences to Forest as a result of the March 1 distribution? b) What at the tax consequences to Forest as a result of the October
Note: Show your calculations, reference all relevant citations (IRC codes & regulation), and explain your answer.
Use a flat corporate rate of 21% for all problems. Use an individual tax rate of 28%, and an individual capital gains rate of 15%.Assume that all dividends are qualified dividends.
Assume there is no Alternative Minimum Tax for these problems. Assume that all entities are US domestic corporations, taxed under Subchapter C of the IRC unless otherwise noted.
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