Question 1

A liquidation of a corporation always is a taxable event to the shareholders of the liquidating corporation.

Accepted Answer

A) True 
 B)False

Question 2

A stock redemption is always treated as a sale or exchange for tax purposes.

Accepted Answer

A) True 
 B)False

Question 3

The "double taxation" of corporate income refers to the fact that corporate income is taxed at both the entity-level and the shareholder-level.

Accepted Answer

A) True 
 B)False

Question 4

Green Corporation has negative current earnings and profits of $100,000 and positive accumulated earnings and profits of $200,000.A $50,000 distribution from Green to its sole shareholder at the end of the year will be treated as a dividend because total earnings and profits is a positive $100,000.

Accepted Answer

A) True 
 B)False

Question 5

Beaver Company reports current E&P of $100,000 in year 1 and accumulated E&P at the beginning of the year of $200,000.Beaver distributed $400,000 to its sole shareholder on January 1,year 1.The shareholder's tax basis in her stock in Beaver is $200,000.How is the distribution treated by the shareholder in year 1?

Accepted Answer

A) $400,000 dividend. 
B) $100,000 dividend,$200,000 nontaxable return of basis,and $100,000 capital gain. 
C) $200,000 dividend and $200,000 nontaxable return of basis. 
D) $300,000 dividend and $100,000 nontaxable return of basis. 
A) $400,000 dividend. 
B) $100,000 dividend,$200,000 nontaxable return of basis,and $100,000 capital gain. 
C) $200,000 dividend and $200,000 nontaxable return of basis. 
D) $300,000 dividend and $100,000 nontaxable return of basis.

Question 6

Viking Corporation is owned equally by Sven and his wife Olga,each of whom hold 100 shares in the company.Viking redeemed 75 shares of Sven's stock for $2,000 per share on December 31,year 1.Viking has total (current plus accumulated)E&P of $500,000.What are the tax consequences to Viking as a result of the stock redemption?

Accepted Answer

A) No reduction in E&P as a result of the exchange. 
B) A reduction of $150,000 in E&P as a result of the exchange. 
C) A reduction of $187,500 in E&P as a result of the exchange. 
D) A reduction of $375,000 in E&P as a result of the exchange. 
A) No reduction in E&P as a result of the exchange. 
B) A reduction of $150,000 in E&P as a result of the exchange. 
C) A reduction of $187,500 in E&P as a result of the exchange. 
D) A reduction of $375,000 in E&P as a result of the exchange.

Question 7

Superior Corporation reported taxable income of $1,000,000 in year 1.Superior paid a dividend of $100,000 to its sole shareholder,Mary Yooper.The dividend meets the requirements to be a "qualified dividend" and Mary is subject to a tax rate of 15% on the dividend.What is the total federal income tax imposed on the corporate income earned by Superior and distributed to Mary as a dividend?

Accepted Answer

None

Question 8

Paladin Corporation transferred its 90 percent interest to Furman Company as part of a complete liquidation of the company.In the exchange,Paladin received land with a fair market value of $1,000,000.The corporation's basis in the Furman Company stock was $400,000.The land had a basis to Furman Company of $200,000.What amount of gain does Paladin recognize in the exchange and what is its basis in the land it receives?

Accepted Answer

A) $600,000 gain recognized and a basis in the land of $1,000,000. 
B) $600,000 gain recognized and a basis in the land of $400,000. 
C) No gain recognized and a basis in the land of $400,000. 
D) No gain recognized and a basis in the land of $200,000. 
A) $600,000 gain recognized and a basis in the land of $1,000,000. 
B) $600,000 gain recognized and a basis in the land of $400,000. 
C) No gain recognized and a basis in the land of $400,000. 
D) No gain recognized and a basis in the land of $200,000.

Question 9

A distribution from a corporation to a shareholder will always be treated as a dividend for tax purposes.

Accepted Answer

A) True 
 B)False

Question 10

Mike and Michelle decided to liquidate their jointly owned corporation,Pennsylvania Corporation.After liquidating its remaining inventory and paying off its remaining liabilities,Pennsylvania had the following tax accounting balance sheet.
 $\begin{array}{rrr}
&&&\text { Appreciation }\
&\text { FMV}&\text { Tax Basis}&\text { (Depreciation)}\
\text { Cash}&\$ 200,000 & \$ 200,000 & \
\text { Building} &200,000 & 100,000& 100,000 \
\text { Land}&\underline {100,000}& \underline {150,000 }&\underline { (50,000)} \
\text { Total}&\underline {\$ 500,000 }&\underline { \$ 450,000  }&\underline {  \$ 50,000}\
\end{array}$ Under the terms of the agreement,Mike will receive the $200,000 cash in exchange for his 40 percent interest in Pennsylvania.Mike's tax basis in his Pennsylvania stock is $50,000.Michelle will receive the building and land in exchange for her 60 percent interest in Pennsylvania.Her tax basis in the Pennsylvania stock is $100,000.
What amount of gain or loss does Michelle recognize in the complete liquidation and what is her tax basis in the building and land after the complete liquidation?

Accepted Answer

Michelle recognizes gain of $200,000 on

Question 11

Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder?

Accepted Answer

A) The distribution is a dividend to the extent of the corporation's earnings and profits,then a return of capital,and finally gain from sale of stock. 
B) The distribution is a return of capital,then a dividend to the extent of the corporation's earnings and profits,and finally gain from sale of stock. 
C) The distribution is a return of capital,then gain from sale of stock,and finally a dividend to the extent of the corporation's earnings and profits. 
D) The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's earnings and profits or a return of capital,followed by gain from sale of stock. 
A) The distribution is a dividend to the extent of the corporation's earnings and profits,then a return of capital,and finally gain from sale of stock. 
B) The distribution is a return of capital,then a dividend to the extent of the corporation's earnings and profits,and finally gain from sale of stock. 
C) The distribution is a return of capital,then gain from sale of stock,and finally a dividend to the extent of the corporation's earnings and profits. 
D) The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's earnings and profits or a return of capital,followed by gain from sale of stock.

Question 12

Lansing Company is owned equally by Jennifer,her husband Dan,and DeWitt Corporation,which is owned 50 percent by Jennifer and her sister Jane.Each of the three shareholders holds 100 shares in the company.Under the §318 stock attribution rules,how many shares of Lansing stock is DeWitt Corporation deemed to own?

Accepted Answer

A) 100. 
B) 200. 
C) 250. 
D) 300. 
A) 100. 
B) 200. 
C) 250. 
D) 300.

Question 13

The term "earnings and profits" is well-defined in the Internal Revenue Code.

Accepted Answer

A) True 
 B)False

Question 14

Mike and Michelle decided to liquidate their jointly owned corporation,Pennsylvania Corporation.After liquidating its remaining inventory and paying off its remaining liabilities,Pennsylvania had the following tax accounting balance sheet.
 $\begin{array}{ccc}
&&&\text { Appreciation }\
&\text { FMV}&\text { Tax Basis}&\text { (Depreciation)}\
\text { Cash}&\$ 200,000 & \$ 200,000 & \
\text { Building}&200,000 & 100,000 & 100,000 \
\text { Land}&\underline {100,000 }& \underline {150,000 }& \underline {(50,000)}\
\text { Total}&\underline {\$ 500,000}&\underline { \$ 450,000} &\underline {\$ 50,000}\
\end{array}$  
Under the terms of the agreement,Mike will receive the $200,000 cash in exchange for his 40 percent interest in Pennsylvania.Mike's tax basis in his Pennsylvania stock is $50,000.Michelle will receive the building and land in exchange for her 60 percent interest in Pennsylvania.Her tax basis in the Pennsylvania stock is $100,000.
What amount of gain or loss does Pennsylvania recognize in the complete liquidation?

Accepted Answer

Pennsylvania has a taxable transaction a

Question 15

A distribution in partial liquidation of a corporation is always treated as a sale by an individual shareholder.

Accepted Answer

A) True 
 B)False

Question 16

Mike and Michelle decided to liquidate their jointly owned corporation,Pennsylvania Corporation.After liquidating its remaining inventory and paying off its remaining liabilities,Pennsylvania had the following tax accounting balance sheet.
 $\begin{array}{ccc}
&&&\text { Appreciation }\
&\text { FMV}&\text { Tax Basis}&\text { (Depreciation)}\
\text { Cash}&\$ 200,000 & \$ 200,000 & \
\text { Building}&200,000 & 100,000 & 100,000 \
\text { Land}&\underline {100,000 }& \underline {150,000 }& \underline {(50,000)}\
\text { Total}&\underline {\$ 500,000}&\underline { \$ 450,000} &\underline {\$ 50,000}\
\end{array}$ Under the terms of the agreement,Mike will receive the $200,000 cash in exchange for his 40 percent interest in Pennsylvania.Mike's tax basis in his Pennsylvania stock is $50,000.Michelle will receive the building and land in exchange for her 60 percent interest in Pennsylvania.Her tax basis in the Pennsylvania stock is $100,000.
What amount of gain or loss does Mike recognize in the complete liquidation?

Accepted Answer

Mike recognizes gain of $150,000 on the

Question 17

Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?

Accepted Answer

A) Parents. 
B) Grandchildren. 
C) Grandparents. 
D) Spouse. 
A) Parents. 
B) Grandchildren. 
C) Grandparents. 
D) Spouse.

Question 18

St.Clair Company reports positive current E&P of $500,000 in year 1 and positive accumulated E&P at the beginning of the year of $400,000.St.Clair Company distributed $600,000 to its sole shareholder,Danielle Brush on December 31,year 1.Danielle's tax basis in her St.Clair stock is $120,000.How much of the $600,000 distribution is treated as a dividend to Danielle and what is her basis in St.Clair stock after the distribution?

Accepted Answer

$600,000 dividend and a tax basis of $12

Question 19

Corona Company is owned equally by Maria,her sister Carlita,her mother Gabriella,and her grandmother Olivia,each of whom hold 100 shares in the company.Under the family attribution rules,how many shares of Corona stock is Maria deemed to own?

Accepted Answer

A) 100. 
B) 200. 
C) 300. 
D) 400. 
A) 100. 
B) 200. 
C) 300. 
D) 400.

Question 20

Gary and Laura decided to liquidate their jointly owned corporation,Amelia,Inc.After liquidating its remaining inventory and paying off its remaining liabilities,Amelia had the following tax accounting balance sheet.
 $\begin{array}{ccc}
&\text { Tax Basis}&\text { FMV}&\text { (Appreciation)}\
\text { Cash}&\$ 100,000 & \$ 100,000 & \
\text { Building}&150,000& 200,000 & 50,000 \
\text { Land}&\underline {50,000 }& \underline {120,000}& \underline {70,000} \
\text { Total}&\underline {\$ 300,000}&\underline { \$ 420,000} &\underline {\$ 120,000}\
\end{array}$ Under the terms of the agreement,Gary will receive the $100,000 cash in exchange for his interest in Amelia.Gary's tax basis in his Amelia stock is $30,000.Laura will receive the building and land in exchange for her interest in Amelia.Laura's tax basis in her Amelia stock is $60,000.
What amount of gain or loss does Laura recognize in the complete liquidation and what is Laura's tax basis in the building and land after the complete liquidation?

Accepted Answer

Laura recognizes gain of $260,000 on the

A liquidation of a corporation always is a taxable event to the shareholders of the liquidating corporation.

A stock redemption is always treated as a sale or exchange for tax purposes.

The "double taxation" of corporate income refers to the fact that corporate income is taxed at both the entity-level and the shareholder-level.

Green Corporation has negative current earnings and profits of $100,000 and positive accumulated earnings and profits of $200,000.A $50,000 distribution from Green to its sole shareholder at the end of the year will be treated as a dividend because total earnings and profits is a positive $100,000.

A distribution from a corporation to a shareholder will always be treated as a dividend for tax purposes.

Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder?

The term "earnings and profits" is well-defined in the Internal Revenue Code.

A distribution in partial liquidation of a corporation is always treated as a sale by an individual shareholder.

Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?

Corona Company is owned equally by Maria,her sister Carlita,her mother Gabriella,and her grandmother Olivia,each of whom hold 100 shares in the company.Under the family attribution rules,how many shares of Corona stock is Maria deemed to own?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview dependents and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

Filters

Exam 13: Corporate Nonliquidating and Liquidating Distributions

A liquidation of a corporation always is a taxable event to the shareholders of the liquidating corporation.

A stock redemption is always treated as a sale or exchange for tax purposes.

The "double taxation" of corporate income refers to the fact that corporate income is taxed at both the entity-level and the shareholder-level.

Green Corporation has negative current earnings and profits of $100,000 and positive accumulated earnings and profits of $200,000.A $50,000 distribution from Green to its sole shareholder at the end of the year will be treated as a dividend because total earnings and profits is a positive $100,000.

A distribution from a corporation to a shareholder will always be treated as a dividend for tax purposes.

Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder?

The term "earnings and profits" is well-defined in the Internal Revenue Code.

A distribution in partial liquidation of a corporation is always treated as a sale by an individual shareholder.

Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?

Corona Company is owned equally by Maria,her sister Carlita,her mother Gabriella,and her grandmother Olivia,each of whom hold 100 shares in the company.Under the family attribution rules,how many shares of Corona stock is Maria deemed to own?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview dependents and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

Filters