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Cayenne Corporation, an accrual basis taxpayer, has struggled to survive since its formation, six years ago. As a result it has a deficit in...
Cayenne Corporation, an accrual basis taxpayer, has struggled to survive since its formation, six years ago. As a result it has a deficit in accumulated E&P at the beginning of the year of $310,000. This year, however, the tide was turned and taxable income was $210,000. Two cash distributions were made to its only shareholder, $130,000 on July 1 and $180,000 on December 31.Taxable income included a NOL carryover of $45,000Federal income tax liability of $63,000Non-deductible fines and kickbacks $4,000Nondeductible life insurance premiums of $20,000Cash surrender value of corporate owned life insurance policies increased by 9,0001231 gain of 95,000 and recapture income under 1245 of 30,000, no other 1231 transactions but a capital loss carryover of 25,000MACRS depreciation exceeds E&P depreciation by 10,000, and a 179 election of $19,000 worth of assetsCompute E&P for the year and determine Marty's tax consequences, assuming his basis is $65,000
