Question 1

Identify which of the following statements is true.

Accepted Answer

A)  If a stock redemption is made by an estate following the decedent's death, the redemption may receive capital gains treatment only if the money is actually used to pay the death taxes. 
B)  Attribution rules do not apply to qualified Sec. 303 stock redemptions. 
C)  The value of decedent's stock satisfies the Sec. 303 minimum if it is less than 35% of the decedent's gross estate. 
D)  All of the above are false. 
A)  If a stock redemption is made by an estate following the decedent's death, the redemption may receive capital gains treatment only if the money is actually used to pay the death taxes. 
B)  Attribution rules do not apply to qualified Sec. 303 stock redemptions. 
C)  The value of decedent's stock satisfies the Sec. 303 minimum if it is less than 35% of the decedent's gross estate. 
D)  All of the above are false.

Question 2

In a nontaxable distribution of stock rights,when the value of the rights is less than 15% of the value of the stock with respect to which the rights were distributed,the basis of the rights is zero unless the shareholder elects to allocate stock basis to the rights.

Accepted Answer

A) True 
 B)False

Question 3

Identify which of the following statements is true.

Accepted Answer

A)  The distributing corporation's E&P must be reduced by the FMV of nontaxable stock rights distributed to shareholders. 
B)  A stock redemption can be used to withdraw some assets from a corporation prior to a sale of the business. 
C)  A shareholder can redeem part of his stock and recognize a capital gain if the corporation has only one shareholder. 
D)  All of the above are false. 
A)  The distributing corporation's E&P must be reduced by the FMV of nontaxable stock rights distributed to shareholders. 
B)  A stock redemption can be used to withdraw some assets from a corporation prior to a sale of the business. 
C)  A shareholder can redeem part of his stock and recognize a capital gain if the corporation has only one shareholder. 
D)  All of the above are false.

Question 4

Ace Corporation has a single class of stock outstanding.Alan owns 200 shares of the common stock,which he purchased for $50 per share two years ago.On April 10,of the current year,Ace Corporation distributes to its shareholders one right to purchase a share of common stock at $60 per share for each share of common stock held.At the time of the distribution,the common stock is worth $75 per share,and the rights are worth $15 per right.On September 10,Alan sells 100 rights for $2,000 and exercises the remaining 100 rights.He sells 60 of the shares acquired with the rights for $80 each on November 10. a)What is the amount and character of income Alan recognizes when he receives the rights?
B)What is the amount and character of gain or loss Alan recognizes when he sells the rights?
C)What is the amount and character of gain or loss Alan recognizes when he exercises the rights?
D)What is the amount and character of gain or loss Alan recognizes when he sells the new common stock?
E)What basis does Alan have in his remaining shares?

Accepted Answer

A)ALAN RECOGNIZES NO INCOME WHEN HE RECE

Question 5

When computing E&P and taxable income,different depreciation methods are often used.What happens when the taxpayer sells such assets?

Accepted Answer

The taxpayer must ca

Question 6

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

Accepted Answer

A)  John has sold his stock and reports a capital gain or loss. 
B)  John has sold his stock and reports a capital gain but no loss. 
C)  the transaction is treated as a contribution to May's capital and a redemption of June stock. 
D)  the sale is recast as a dividend paid to John, first by June and then by May. 
A)  John has sold his stock and reports a capital gain or loss. 
B)  John has sold his stock and reports a capital gain but no loss. 
C)  the transaction is treated as a contribution to May's capital and a redemption of June stock. 
D)  the sale is recast as a dividend paid to John, first by June and then by May.

Question 7

White Corporation is a calendar-year taxpayer.Wilhelmina owns all of its stock.Her basis for the stock is $25,000.On March 1 of the current year (not a leap year),White Corporation distributes $60,000 to Wilhelmina.Determine the tax consequences of the cash distribution to Wilhelmina in each of the following independent situations:
a)Current E&P $15,000,accumulated E&P $50,000.
b)Current E&P $25,000,accumulated E&P $(25,000).
c)Current E&P ($36,500),accumulated E&P $65,000.
d)Current E&P ($10,000),accumulated E&P $(25,000).

Accepted Answer

a)$60,000 dividend to Wilhelmina; $15,00

Question 8

An individual shareholder owns 3,000 shares of Baxter Corporation common stock with a basis of $10 per share.She receives a nontaxable 5% stock dividend.The basis per share of the common stock after the stock dividend is

Accepted Answer

A)  $9.00. 
B)  $9.50. 
C)  $9.52. 
D)  $10.00. 
A)  $9.00. 
B)  $9.50. 
C)  $9.52. 
D)  $10.00.

Question 9

John,the sole shareholder of Photo Specialty Corporation has had an exceptional year.He is considering issuing himself a large bonus in lieu of a dividend.You are concerned about unreasonable compensation.What issues must be considered?

Accepted Answer

• The employee's qualifications
• The na

Question 10

River Corporation's taxable income is $25,000,after deducting a $5,000 NOL carryover from last year and after claiming a $10,000 dividends-received deduction.What is the current E&P?

Accepted Answer

River must add back the $10,00

Question 11

Poppy Corporation was formed three years ago.Poppy's E&P history is as follows:   Poppy Corporation's accumulated E&P on January 1 will be

Accepted Answer

A)  $0. 
B)  $7,000. 
C)  $5,000. 
D)  $12,000. 
A)  $0. 
B)  $7,000. 
C)  $5,000. 
D)  $12,000.

Question 12

In the current year,Pearl Corporation has $300,000 of current and accumulated E&P.On June 3,Pearl Corporation distributes a parcel of land (a capital asset)worth $120,000 to Betty,a shareholder.The land has a $60,000 adjusted basis to Pearl Corporation and is subject to a $16,000 mortgage,which Betty assumes.Assume a 34% marginal corporate tax rate.
a)What is the amount and character of the income recognized by Betty as a result of the distribution?
b)What is Betty's basis for the land?
c)What is the amount and character of Pearl's gain or loss as a result of the distribution?
d)What effect does the distribution have on Pearl's E&P?

Accepted Answer

a)Betty has a taxable dividend of $104,0

Question 13

Identify which of the following statements is true.

Accepted Answer

A)  Loans made to shareholders in proportion to their stock ownership in the corporation is evidence that the loans are disguised dividends. 
B)  Corporate payments for the shareholder's benefit may be a taxable dividend. 
C)  If the shareholder can elect to receive distributing corporation stock or money, the receipt of distributing corporation stock will be a taxable dividend. 
D)  All of the above are true. 
A)  Loans made to shareholders in proportion to their stock ownership in the corporation is evidence that the loans are disguised dividends. 
B)  Corporate payments for the shareholder's benefit may be a taxable dividend. 
C)  If the shareholder can elect to receive distributing corporation stock or money, the receipt of distributing corporation stock will be a taxable dividend. 
D)  All of the above are true.

Question 14

Identify which of the following statements is false.

Accepted Answer

A)  The distribution of stock rights will be taxable if the value of the stock rights is more than 15% of the value of the underlying stock. 
B)  The distribution of stock rights is generally tax free under Sec. 305. 
C)  If the value of stock rights is less than 15% of the value of the underlying stock, the basis of the rights is zero unless the shareholder elects to allocate basis to the rights. 
D)  The holding period for stock rights includes the holding period for the underlying stock. 
A)  The distribution of stock rights will be taxable if the value of the stock rights is more than 15% of the value of the underlying stock. 
B)  The distribution of stock rights is generally tax free under Sec. 305. 
C)  If the value of stock rights is less than 15% of the value of the underlying stock, the basis of the rights is zero unless the shareholder elects to allocate basis to the rights. 
D)  The holding period for stock rights includes the holding period for the underlying stock.

Question 15

Which of the following requirements must be met for a redemption to be treated as substantially disproportionate?

Accepted Answer

A)  The shareholder must own less than 50% of the outstanding stock (in terms of voting power) after the redemption. 
B)  After the redemption, the shareholder must own less than 80% of his percentage ownership of voting stock prior to the redemption. 
C)  After the redemption, the shareholder must own less than 80% of his percentage ownership of common stock (voting and nonvoting) prior to the redemption. 
D)  All of the above must be met. 
A)  The shareholder must own less than 50% of the outstanding stock (in terms of voting power) after the redemption. 
B)  After the redemption, the shareholder must own less than 80% of his percentage ownership of voting stock prior to the redemption. 
C)  After the redemption, the shareholder must own less than 80% of his percentage ownership of common stock (voting and nonvoting) prior to the redemption. 
D)  All of the above must be met.

Question 16

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 17

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 18

How does a shareholder classify a distribution for tax purposes?

Accepted Answer

Distributions are treated as f

Question 19

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

Accepted Answer

Taxable income
Plus: income excluded fro

Question 20

Boxer Corporation buys equipment in January of the current year with a seven-year class life for $15,000.The corporation expensed the $15,000 under Sec.179.The deduction in the year of purchase for E&P purposes due to the acquisition and expensing of the equipment is

Accepted Answer

A)  $1,500. 
B)  $3,000. 
C)  $14,000. 
D)  $15,000. 
A)  $1,500. 
B)  $3,000. 
C)  $14,000. 
D)  $15,000.

Identify which of the following statements is true.

In a nontaxable distribution of stock rights,when the value of the rights is less than 15% of the value of the stock with respect to which the rights were distributed,the basis of the rights is zero unless the shareholder elects to allocate stock basis to the rights.

Identify which of the following statements is true.

When computing E&P and taxable income,different depreciation methods are often used.What happens when the taxpayer sells such assets?

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

An individual shareholder owns 3,000 shares of Baxter Corporation common stock with a basis of $10 per share.She receives a nontaxable 5% stock dividend.The basis per share of the common stock after the stock dividend is

John,the sole shareholder of Photo Specialty Corporation has had an exceptional year.He is considering issuing himself a large bonus in lieu of a dividend.You are concerned about unreasonable compensation.What issues must be considered?

River Corporation's taxable income is $25,000,after deducting a $5,000 NOL carryover from last year and after claiming a $10,000 dividends-received deduction.What is the current E&P?

Poppy Corporation was formed three years ago.Poppy's E&P history is as follows: Poppy Corporation's accumulated E&P on January 1 will be

Identify which of the following statements is true.

Identify which of the following statements is false.

Which of the following requirements must be met for a redemption to be treated as substantially disproportionate?

Identify which of the following statements is true.

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

How does a shareholder classify a distribution for tax purposes?

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

Boxer Corporation buys equipment in January of the current year with a seven-year class life for $15,000.The corporation expensed the $15,000 under Sec.179.The deduction in the year of purchase for E&P purposes due to the acquisition and expensing of the equipment is

Tax Research

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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

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

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Exam 4: Corporate Nonliquidating Distributions

Identify which of the following statements is true.

In a nontaxable distribution of stock rights,when the value of the rights is less than 15% of the value of the stock with respect to which the rights were distributed,the basis of the rights is zero unless the shareholder elects to allocate stock basis to the rights.

Identify which of the following statements is true.

When computing E&P and taxable income,different depreciation methods are often used.What happens when the taxpayer sells such assets?

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

An individual shareholder owns 3,000 shares of Baxter Corporation common stock with a basis of $10 per share.She receives a nontaxable 5% stock dividend.The basis per share of the common stock after the stock dividend is

John,the sole shareholder of Photo Specialty Corporation has had an exceptional year.He is considering issuing himself a large bonus in lieu of a dividend.You are concerned about unreasonable compensation.What issues must be considered?

River Corporation's taxable income is $25,000,after deducting a $5,000 NOL carryover from last year and after claiming a $10,000 dividends-received deduction.What is the current E&P?

Poppy Corporation was formed three years ago.Poppy's E&P history is as follows: Poppy Corporation's accumulated E&P on January 1 will be

Identify which of the following statements is true.

Identify which of the following statements is false.

Which of the following requirements must be met for a redemption to be treated as substantially disproportionate?

Identify which of the following statements is true.

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

How does a shareholder classify a distribution for tax purposes?

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

Boxer Corporation buys equipment in January of the current year with a seven-year class life for $15,000.The corporation expensed the $15,000 under Sec.179.The deduction in the year of purchase for E&P purposes due to the acquisition and expensing of the equipment is

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

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

US Taxation of Foreign-Related Transactions

Filters