Exam 4: Corporate Nonliquidating Distributions

Wills Corporation,which has accumulated a current E&P totaling $65,000,distributes land to its sole shareholder,an individual.The land has an FMV of $75,000 and an adjusted basis of $55,000.The shareholder assumes a $15,000 liability associated with the land.The shareholder will recognize

Jack Corporation redeems 200 shares of its stock for $100,000 from Junior,who inherited the stock from his father,Ken.The stock's FMV on Ken's date of death was $90,000.Ken's basis in the stock was $40,000.Jack Corporation had an E&P balance of $300,000.If the redemption qualifies under Sec.303,Junior will

Poppy Corporation was formed three years ago.Poppy's E&P history is as follows: Year Current E\&P Distributions 2005 \ 6,000 \ 4,000 2006 5,000 1,000 2007 1,000 0 Poppy Corporation's accumulated E&P on January 1 will be

John owns 70% of the May Corporation stock and 60% of the June Corporation stock.John sells one-half of his interest in May Corporation to June Corporation for $45,000.The E&P accounts of May and June are $25,000 and $35,000,respectively.The result would be that

For purposes of determining current E&P,which of the following items cannot be deducted in the year incurred?

Identify which of the following statements is false.

Van owns all 1,000 shares of Valley Metal Corporation stock.The stock has a $100,000 FMV.Karen wants to purchase the stock from Van but has only $70,000.Valley Metal has ample cash,which is not needed for operations.Which of the following best qualifies for bootstrap redemption treatment and no constructive dividends to the purchaser?

Identify which of the following statements is false.

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?

Rose has a $20,000 basis in the 60% of the Parent Corporation stock that she owns.Parent Corporation owns a 70% interest in Child Corporation.Parent and Child have current and accumulated E&P balances of $25,000 and $40,000,respectively.In return for $15,000,Rose sells 10% of the Parent Corporation stock to Child Corporation.What is the impact of the transaction on Rose?

Tomika Corporation has current and accumulated earnings and profits of $0.Tomika distributes $10,000 to its sole shareholder,Alana.What are Tomika's earnings and profits after the distribution?

Grant Corporation sells land (a noninventory item)with a basis of $57,000 for $100,000.Nichole will be paid on an installment basis in five equal annual payments,starting in the current year.The E&P for the year of sale will be increased as a result of the sale (excluding federal income taxes)by

Good Times Corporation has a $60,000 accumulated E&P balance at the beginning of the year and incurs a $100,000 deficit during the year.Because of its poor operating performance,Good Times pays only three of its usual $10,000 quarterly dividend payments to its sole shareholder: those ordinarily paid March 31,June 30,and September 30.How are the March 31,June 30,and September 30 payments of $10,000 treated?

Which of the following statements is not true about redemptions?