Homework
In 2015, Beige Corporation made a cash distribution to its shareholders, one of whom was Steve Jordan.
At that time, the parties involved believed the distribution was a return of capital because Beige had no E & P. Accordingly, none of the shareholders reported dividend income. In Steve's case, he reduced the $200,000 original basis of his stock investment by $40,000, his share of the distribution. In 2021, Steve discovered that E & P had been incorrectly computed. The 2015 distribution was fully covered by E & P and should not have been treated as a return of capital.
In 2021, Steve sells his stock in Beige Corporation for $350,000. He plans to report a gain of $150,000 [$350,000 (selling price) - $200,000 (original basis)] on the sale. Although Steve realizes he should have recognized dividend income of $40,000 for 2015, the statute of limitations has made this a closed year.
Comment on Steve's situation. Steve has asked you to prepare his tax return for 2021. Should you accept this engagement?
i. Prepare your response as if it is for a partner in your firm.
ii. Reference the AICPA Statements on Standards for Tax Services.
Format your homework according to the following formatting requirements:
i) The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
ii) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
iii) Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.