Question 1

A partial liquidation of a corporation is treated as a dividend in the case of a corporate shareholder.

Accepted Answer

A) True 
 B)False

Question 2

Identify which of the following statements is true.

Accepted Answer

A)  The distribution of preferred stock as a stock dividend will result in income or a taxable gain being recognized by the shareholder on the date of the distribution if the stock is Sec. 306 stock. 
B)  Corporations without E&P can distribute preferred stock as a stock dividend that is Sec. 306 stock. 
C)  Two corporations are considered to be brother-sister corporations for purposes of the Sec. 304 redemption rules if one shareholder owns more than 50% of each corporation. 
D)  All of the above are false. 
A)  The distribution of preferred stock as a stock dividend will result in income or a taxable gain being recognized by the shareholder on the date of the distribution if the stock is Sec. 306 stock. 
B)  Corporations without E&P can distribute preferred stock as a stock dividend that is Sec. 306 stock. 
C)  Two corporations are considered to be brother-sister corporations for purposes of the Sec. 304 redemption rules if one shareholder owns more than 50% of each corporation. 
D)  All of the above are false.

Question 3

Susan owns 150 of the 200 outstanding shares of Parent Corporation's stock. Parent owns 160 of the 200 outstanding shares of Subsidiary Corporation's stock. Susan sells 50 shares of her Parent stock to Subsidiary for $40,000. Susan's basis in her Parent shares is $15,000 ($100 per share). Subsidiary Corporation and Parent Corporation have E&P of $60,000 and $25,000, respectively, at the end of the year in which the redemption occurs.
a) What is the amount and character of Susan's gain or loss on the sale?
b) What is Susan's basis in her remaining shares of Parent stock?
c) How does the sale affect the E&P of Parent and Subsidiary Corporations?
d) What basis does Subsidiary Corporation take in the Parent shares it purchases?
e) How would your answer to Part (a) change if Susan instead sells 100 of her Parent shares to Subsidiary Corporation for $80,000?

Accepted Answer

a) The sale is recast as a redemption. S

Question 4

Identify which of the following statements is true.

Accepted Answer

A)  The FMV of an obligation is used to determine the E&P reduction when a corporation distributes the obligation to its shareholders. 
B)  When appreciated property is distributed to shareholders, E&P must be increased by any gain (net of taxes) recognized due to the property distribution. 
C)  When appreciated property is distributed in a nonliquidating distribution, the net effect on the distributing corporation's E&P is that it is reduced by the net of the FMV of the property distributed minus the gain (net of federal income taxes) recognized due to the property distribution. 
D)  Only B and C above are true. 
A)  The FMV of an obligation is used to determine the E&P reduction when a corporation distributes the obligation to its shareholders. 
B)  When appreciated property is distributed to shareholders, E&P must be increased by any gain (net of taxes) recognized due to the property distribution. 
C)  When appreciated property is distributed in a nonliquidating distribution, the net effect on the distributing corporation's E&P is that it is reduced by the net of the FMV of the property distributed minus the gain (net of federal income taxes) recognized due to the property distribution. 
D)  Only B and C above are true.

Question 5

Stone Corporation redeems 1,000 share of its stock from Steve for $100,000. Steve's basis in those shares is $80,000. What tax issues should Steve consider with respect to the transaction?

Accepted Answer

• Is the redemption a sale?
• Is the red

Question 6

In a taxable distribution of stock, the recipient shareholder takes a basis equal to the FMV of the stock received.

Accepted Answer

A) True 
 B)False

Question 7

Blast Corporation manufactures purses and make-up kits. The corporation decides to quit manufacturing purses and distributes the assets associated with this division to its shareholders. The distribution of the these assets will be treated as a partial liquidation if

Accepted Answer

A)  the corporation so elects. 
B)  the corporation discontinues the line of business and the transaction is "essentially equivalent to a dividend." 
C)  the distribution is made within 24 months of the adoption of a plan of liquidation and the transaction is "not essentially equivalent to a dividend." 
D)  the distribution is "not essentially equivalent to a dividend" and is made within the year a plan of liquidation is adopted or within the succeeding year. 
A)  the corporation so elects. 
B)  the corporation discontinues the line of business and the transaction is "essentially equivalent to a dividend." 
C)  the distribution is made within 24 months of the adoption of a plan of liquidation and the transaction is "not essentially equivalent to a dividend." 
D)  the distribution is "not essentially equivalent to a dividend" and is made within the year a plan of liquidation is adopted or within the succeeding year.

Question 8

Payment Corporation has accumulated E&P of $19,000 and current E&P of $28,000. During the year, the corporation makes the following distributions to its sole shareholder:
   The sole shareholder's basis in her stock is $45,000. What are the tax consequences of the June 1 distribution?

Accepted Answer

The current E&P is allocated ratably to

Question 9

Two corporations are considered to be brother-sister corporations for purposes of the Sec. 304 redemption rules if one shareholder owns more than 50% of each corporation.

Accepted Answer

A) True 
 B)False

Question 10

Outline the computation of current E&P, including two examples for each adjustment.

Accepted Answer

Taxable income
Plus: income excluded fro

Question 11

What is a stock redemption? What are some of the reasons for making a stock redemption? Why are some redemptions treated as sales and others as dividends?

Accepted Answer

A stock redemption is the acquisition by

Question 12

Maury Corporation has 200 shares of stock outstanding as follows:
Name Shares
Amy (an individual) 30
APB Partnership (Amy is a 20% partner) 25
ABC Partnership (Amy is a 70% partner) 50
Silver Corporation (Amy is a 30% shareholder) 50
Gold Corporation (Amy is a 60% shareholder) 45
Total 200
How many shares is Amy deemed to own under the Sec. 318 attribution rules?

Accepted Answer

Amy owns: 30 shares directly
5 shares th

Question 13

A corporation distributes land and the related liability to Meg, its sole shareholder. The land has an FMV of $60,000 and is subject to a liability of $70,000. The corporation has current and accumulated E&P of $80,000. The corporation's adjusted basis for the property is $70,000. What effect does the transaction have on the corporation?

Accepted Answer

A)  A recognized loss of $10,000; its E&P is reduced by $70,000. 
B)  A recognized loss of $10,000; its E&P is unchanged. 
C)  No recognized gain or loss; its E&P is reduced by $60,000. 
D)  No recognized gain or loss; its E&P is unchanged by the distribution. 
A)  A recognized loss of $10,000; its E&P is reduced by $70,000. 
B)  A recognized loss of $10,000; its E&P is unchanged. 
C)  No recognized gain or loss; its E&P is reduced by $60,000. 
D)  No recognized gain or loss; its E&P is unchanged by the distribution.

Question 14

Which of the following statements is not true about redemptions?

Accepted Answer

A)  Redemptions of Sec. 306 stock are generally treated as dividends to the shareholder. 
B)  A sale of stock from one controlled corporation to another controlled corporation is treated as a redemption. 
C)  Redemptions to pay death taxes are treated as dividends to the shareholder. 
D)  A distribution in redemption of stock is generally a dividend. 
A)  Redemptions of Sec. 306 stock are generally treated as dividends to the shareholder. 
B)  A sale of stock from one controlled corporation to another controlled corporation is treated as a redemption. 
C)  Redemptions to pay death taxes are treated as dividends to the shareholder. 
D)  A distribution in redemption of stock is generally a dividend.

Question 15

Peach Corporation was formed four years ago. Its current E&P (or E&P deficit) and distributions for the most recent four years are as follows:
   What is Peach's accumulated E&P at the beginning of 2015, 2016, 2017 and 2018?

Accepted Answer

2015: ($20,000)^a 2016: ($16,000)^b 2017: ($

Question 16

One consequence of a property distribution by a corporation to a shareholder is that

Accepted Answer

A)  the amount of the distribution is increased by any liability assumed by the shareholder. 
B)  the holding period of the distributed property includes the holding period of the distributing corporation. 
C)  the shareholder's basis in the distributed property is the same as the distributing corporation's basis. 
D)  any liabilities assumed by the shareholder do not reduce the shareholder's basis. 
A)  the amount of the distribution is increased by any liability assumed by the shareholder. 
B)  the holding period of the distributed property includes the holding period of the distributing corporation. 
C)  the shareholder's basis in the distributed property is the same as the distributing corporation's basis. 
D)  any liabilities assumed by the shareholder do not reduce the shareholder's basis.

Question 17

Crossroads Corporation distributes $60,000 to its sole shareholder Harley. Crossroads has earnings and profits of $55,000 and Harley's basis in her stock is $20,000. After the distribution, Harley's basis is

Accepted Answer

A)  $5,000. 
B)  $15,000. 
C)  $20,000. 
D)  $60,000. 
A)  $5,000. 
B)  $15,000. 
C)  $20,000. 
D)  $60,000.

Question 18

Identify which of the following statements is true.

Accepted Answer

A)  If both the current and accumulated E&P have deficit balances, a corporate distribution cannot be characterized as a dividend. 
B)  The shareholder's basis in property received in a nonliquidating distribution is the property's FMV reduced by liabilities assumed by the shareholder. 
C)  A corporation recognizes gain when distributing money as a dividend to its shareholders. 
D)  All of the above are false. 
A)  If both the current and accumulated E&P have deficit balances, a corporate distribution cannot be characterized as a dividend. 
B)  The shareholder's basis in property received in a nonliquidating distribution is the property's FMV reduced by liabilities assumed by the shareholder. 
C)  A corporation recognizes gain when distributing money as a dividend to its shareholders. 
D)  All of the above are false.

Question 19

A stock redemption is always treated as if the shareholder sold his stock to the corporation.

Accepted Answer

A) True 
 B)False

Question 20

What must be reported to the IRS by corporations when nondividend distributions are made to its shareholders?

Accepted Answer

The basic purpose of Form 5452, Corporat

A partial liquidation of a corporation is treated as a dividend in the case of a corporate shareholder.

Identify which of the following statements is true.

Identify which of the following statements is true.

Stone Corporation redeems 1,000 share of its stock from Steve for $100,000. Steve's basis in those shares is $80,000. What tax issues should Steve consider with respect to the transaction?

In a taxable distribution of stock, the recipient shareholder takes a basis equal to the FMV of the stock received.

Blast Corporation manufactures purses and make-up kits. The corporation decides to quit manufacturing purses and distributes the assets associated with this division to its shareholders. The distribution of the these assets will be treated as a partial liquidation if

Payment Corporation has accumulated E&P of $19,000 and current E&P of $28,000. During the year, the corporation makes the following distributions to its sole shareholder: The sole shareholder's basis in her stock is $45,000. What are the tax consequences of the June 1 distribution?

Two corporations are considered to be brother-sister corporations for purposes of the Sec. 304 redemption rules if one shareholder owns more than 50% of each corporation.

Outline the computation of current E&P, including two examples for each adjustment.

What is a stock redemption? What are some of the reasons for making a stock redemption? Why are some redemptions treated as sales and others as dividends?

Which of the following statements is not true about redemptions?

Peach Corporation was formed four years ago. Its current E&P (or E&P deficit) and distributions for the most recent four years are as follows: What is Peach's accumulated E&P at the beginning of 2015, 2016, 2017 and 2018?

One consequence of a property distribution by a corporation to a shareholder is that

Crossroads Corporation distributes $60,000 to its sole shareholder Harley. Crossroads has earnings and profits of $55,000 and Harley's basis in her stock is $20,000. After the distribution, Harley's basis is

Identify which of the following statements is true.

A stock redemption is always treated as if the shareholder sold his stock to the corporation.

What must be reported to the IRS by corporations when nondividend distributions are made to its shareholders?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Exam 4: Corporate Nonliquidating Distributions

A partial liquidation of a corporation is treated as a dividend in the case of a corporate shareholder.

Identify which of the following statements is true.

Identify which of the following statements is true.

Stone Corporation redeems 1,000 share of its stock from Steve for $100,000. Steve's basis in those shares is $80,000. What tax issues should Steve consider with respect to the transaction?

In a taxable distribution of stock, the recipient shareholder takes a basis equal to the FMV of the stock received.

Blast Corporation manufactures purses and make-up kits. The corporation decides to quit manufacturing purses and distributes the assets associated with this division to its shareholders. The distribution of the these assets will be treated as a partial liquidation if

Payment Corporation has accumulated E&P of $19,000 and current E&P of $28,000. During the year, the corporation makes the following distributions to its sole shareholder: The sole shareholder's basis in her stock is $45,000. What are the tax consequences of the June 1 distribution?

Two corporations are considered to be brother-sister corporations for purposes of the Sec. 304 redemption rules if one shareholder owns more than 50% of each corporation.

Outline the computation of current E&P, including two examples for each adjustment.

What is a stock redemption? What are some of the reasons for making a stock redemption? Why are some redemptions treated as sales and others as dividends?

Which of the following statements is not true about redemptions?

Peach Corporation was formed four years ago. Its current E&P (or E&P deficit) and distributions for the most recent four years are as follows: What is Peach's accumulated E&P at the beginning of 2015, 2016, 2017 and 2018?

One consequence of a property distribution by a corporation to a shareholder is that

Crossroads Corporation distributes $60,000 to its sole shareholder Harley. Crossroads has earnings and profits of $55,000 and Harley's basis in her stock is $20,000. After the distribution, Harley's basis is

Identify which of the following statements is true.

A stock redemption is always treated as if the shareholder sold his stock to the corporation.

What must be reported to the IRS by corporations when nondividend distributions are made to its shareholders?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters