Equal cash, unequal outcomes: in AC430 Unit 5, E&P fixes each shareholder's dividend, and stock basis decides whether the rest is recovered tax-free or taxed as gain. Searches like "ac 430 unit 5 assignment example", "ac430 unit 5 sample" and "ac430 unit 5 example" land here.
What a finished AC430 Unit 5 distribution problem looks like
A single page carrying the corporation's E&P at the top and one column per shareholder below. Current E&P of [$60,000] and accumulated E&P of [$40,000] total $100,000, so Section 316 treats $50,000 of each owner's $75,000 as a dividend. The remainder is where the columns part. Shareholder one, holding a stock basis of [$50,000], applies $25,000 against it under Section 301(c)(2) and keeps $25,000 of basis. Shareholder two, with only [$10,000] of basis, recovers all of it and reports $15,000 of capital gain under Section 301(c)(3). A corporate block records E&P reduced to zero under Section 312(a), which never pushes the account negative, and confirms no gain to the company for paying cash. A closing note reworks the split with a current deficit instead.
How a AC430 Unit 5 example is structured
Sequence carries more of the grade here than in most problems, and the example keeps the statute's. E&P is fixed before any shareholder is considered, because the dividend portion is decided at the corporate level and applies to both owners alike. Current E&P is allocated first, pro rata to every distribution made during the year, and accumulated E&P second, by date. Only after the dividend amount is set does the problem look at individual basis, and each column runs the same three rows so the difference between the owners shows at a glance. Qualified dividend treatment is noted, its rate bracketed because it depends on the problem's year. The closing note uses Revenue Ruling 74-164 to show how a deficit in current E&P is netted against accumulated E&P at the distribution date, a variation prompts sometimes add.
Corporate figure first
Current and accumulated E&P are stated and totaled before either shareholder appears, since the dividend amount does not depend on who receives the cash.
Matching rows per owner
Each owner's dividend, basis recovery and gain sit in matching rows, so the only difference between the columns is the starting basis.
Basis that runs out
Shareholder two's [$10,000] basis is exhausted and the remaining $15,000 becomes capital gain under Section 301(c)(3), with the holding period noted.
What the company records
E&P falls to zero under Section 312(a), and paying cash triggers no gain for the company, which would not be true of appreciated property.
A deficit variation
A short note reruns the problem with current E&P negative and shows netting at the distribution date under Revenue Ruling 74-164.
Where marks go in AC430 Unit 5
Most deductions on this problem trace to a single shortcut: calling the whole payment a dividend. It ignores Section 316's limit and leaves the grader nothing to check. The reverse shortcut, applying each shareholder's basis before E&P, makes the problem look personalized and gets the statute's order wrong. Sections commonly mark down basis reduced below zero, since the excess is gain, not negative basis. Treating that gain as ordinary income misses the exchange treatment in Section 301(c)(3). Many submissions omit the corporate block entirely, although the rubric usually asks for consequences at both levels. Allocating accumulated E&P pro rata over the year, rather than by date, is a subtler error that surfaces only when a prompt adds a second distribution. Qualified rate figures given without a tax year also cost points.
Get a AC430 Unit 5 example written to your instructions
Send the Unit 5 facts, including every shareholder's basis and the E&P figures if the prompt supplies them, along with your rubric. The dividend is fixed at the corporate level first, each owner gets a column, and the problem is back within 24-48h. No charge applies to a first custom sample; the printers are fictional.
AC430 Unit 5 questions, answered
Why do the two shareholders get the same dividend?
Because Section 316 measures the dividend against the corporation's E&P, not the shareholder's position. With $100,000 available and two equal distributions, each $75,000 payment is two-thirds dividend. Basis only enters after that, which is why the owners diverge on the remainder. A problem with unequal holdings or different payment dates would allocate E&P differently.
What if the company distributed a truck instead of cash?
Then the corporation would recognize gain under Section 311(b) as if it had sold the truck, E&P would change to reflect that gain and the tax on it, and each shareholder's amount would be the truck's fair market value. The example mentions this in its corporate block, since unit prompts sometimes switch the property to test Section 311.
Is the capital gain long-term?
It follows the holding period of the stock. The example assumes shares held more than a year and labels the gain long-term, leaving the rate in brackets until the facts fix a year. If your facts give a recent purchase date, the same gain would be short-term and taxed at ordinary rates instead.