Tracy and lance, equal shareholders in macaw corporation, receive $600,000 each in distributions on december 31 of the current year. macaw’s current year taxable income is $1 million and it has no accumulated e & p. last year, macaw sold an appreciated asset for $1,200,000 (basis of $400,000). payment for one-half of the sale of the asset was made this year. how much of tracy’s distribution will be taxed as a dividend? a. $0b. $300,000c. $500,000d. $600,000e. none of the above

B. $300,000

Explanation:

Macaw Corporation increased its E & P last year for the entire amount of the deferred gain on the installment sale. Since one-half of the $800,000 gain is included in taxable income in the current year, taxable income should be reduced by this amount to determine current E & P. Therefore, Macaw Corporation’s current year E & P is $600,000 ($1 million taxable income – $400,000 of installment sale gain). Because one-half of the current E & P is allocated to Tracy’s distribution, she has a $300,000 dividend

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.