Exam 4: Corporate Nonliquidating Distributions

Family Corporation,a corporation controlled by Buddy's family,redeems all of Buddy's stock.For the redemption to be treated as a sale,which one of the following conditions must be met?

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?

Identify which of the following statements is true.

Identify which of the following statements is true.

Bart,a 50% owner of Atlas Corporation's common stock,receives a distribution of a new class of Atlas preferred stock having a $40,000 FMV.Bart's basis in the Atlas common stock is $30,000.Its FMV is $80,000 on the distribution date.One year later,the corporation redeems the preferred stock for $75,000.At the time the stock was issued,the corporation's current and accumulated E&P was $80,000.At the end of the year of redemption,the current and accumulated E&P is $25,000.No other distributions out of E&P were made in the year of redemption.What are the tax consequences of the transaction?

In the current year,Ho Corporation sells land that has a $6,000 basis and a $10,000 FMV to Henry,an unrelated individual.Henry makes a $2,500 down payment this year and will pay Ho $2,500 per year for the next three years,plus interest on the unpaid balance at a rate acceptable to the IRS.Ho's realized gain is $4,000.Since Ho is not in the business of selling land,it will use the installment method of accounting.How does this transaction affect Ho's E&P in the current year and the three subsequent years?

Jerry purchased land from Winter Harbor Corporation,his 100%-owned corporation,for $275,000.The corporation purchased the land three years ago for $300,000.Similar tracts of land located nearby have sold for $400,000 in recent months.What tax issues should be considered with respect to the corporation's sale of the land?

Nichol Corporation has 100 shares of common stock outstanding.Nichol repurchased all of Ned's 30 shares for $35,000 cash during the current year.Ned received the shares as a gift from his mother three years ago.They have a basis to him of $16,000.Nichol Corporation has $100,000 in current and accumulated E&P.Ned's mother owns 40 of the remaining shares; unrelated individuals own the other 30 shares.What tax issues should be considered with respect to the corporation's purchase of Ned's shares?

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?

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 true.

Bruce receives 20 stock rights in a nontaxable distribution.The stock rights have an FMV of $5,000.The common stock with respect to which the rights are issued has a basis of $4,000 and an FMV of $120,000.Bruce allows the stock rights to lapse.He can deduct a loss of

Which of the following is not a reason for a stock redemption?

Tia owns 2,000 shares of Bass Corporation common stock with an $80,000 basis.Bass distributes a nontaxable preferred stock dividend.When the preferred stock is distributed,it has an FMV of $60,000 and the FMV of the 2,000 common stock shares is $180,000.The basis of the preferred stock is

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

Hogg Corporation distributes $30,000 to its sole shareholder,Ima.At the time of the distribution,Hogg's E&P is $14,000 and Ima's basis in her stock is $10,000.Ima's gain from this transaction is a

Define Sec.306 stock.

Which of the following transactions does not have the potential of creating a constructive dividend?

All of Sphere Corporation's single class of stock is owned by four unrelated individuals in the following manner: Zack 27%,Xu 24.33%,Yvonne 24.33%,and Win 24.33%.Some of Zack's stock holdings are redeemed by Sphere Corporation,resulting in Zack's interest being reduced to 22.27%.Xu,Yvonne,and Win owned equally the remaining 77.73% of the Sphere stock.How should the redemption of Zack's stock be treated by Zack?

Oreo Corporation has accumulated E&P of $8,000 at the beginning of the current year.During the year (a nonleap year),the corporation incurs a current E&P deficit of $18,250.The corporation distributes $11,000 on March 20th to Morris,its sole shareholder,who has a $9,000 basis for his stock.If the exact loss cannot be determined as of the date of distribution,the treatment of the distribution will be