Question 1

Constructive dividends do not need to satisfy the legal requirements for a dividend as set forth by applicable state law.

Accepted Answer

A) True 
 B)False

Question 2

Rose Corporation (a calendar year taxpayer) has taxable income of $300,000,and its financial records reflect the following for the year.
​
 
Rose Corporation's current E & P is:

Accepted Answer

A) $254,000. 
B) $214,000. 
C) $194,000. 
D) $104,000. 
E) None of the above. 
A) $254,000. 
B) $214,000. 
C) $194,000. 
D) $104,000. 
E) None of the above.

Question 3

A distribution from a corporation will be taxable to the recipient shareholders only to the extent of the corporation's E & P.

Accepted Answer

A) True 
 B)False

Question 4

Dividends paid to shareholders who hold both long and short positions do not qualify for the reduced tax rate available to individuals in certain years.

Accepted Answer

A) True 
 B)False

Question 5

In applying the § 318 stock attribution rules to a stock redemption,a shareholder is treated as owning the stock of her spouse,children,grandchildren,parents,and siblings.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the LIFO recapture amount must be added to taxable income to determine E & P.

Accepted Answer

A) True 
 B)False

Question 7

Lucinda owns 1,100 shares of Blackbird Corporation stock at a time when Blackbird has 2,000 shares of stock outstanding.The remaining shareholders are unrelated to Lucinda.What is the minimum number of shares Blackbird must redeem from Lucinda so that the transaction will qualify as a disproportionate redemption?

Accepted Answer

A) 220 
B) 393 
C) 484 
D) 880 
E) None of the above 
A) 220 
B) 393 
C) 484 
D) 880 
E) None of the above

Question 8

Which of the following statements is correct with respect to a partial liquidation?

Accepted Answer

A) The genuine contraction of a corporate business requirement is an objective test that taxpayers can rely upon with certainty. 
B) The distribution of proceeds from the sale of excess inventory to shareholders in exchange for part of their stock will not satisfy the not essentially equivalent to a dividend test. 
C) A stock redemption pursuant to a partial liquidation cannot be pro rata with respect to the shareholders. 
D) The termination of a business test requires that the distributing corporation actively conducted at least three trades or businesses for at least five years. 
E) None of the above. 
A) The genuine contraction of a corporate business requirement is an objective test that taxpayers can rely upon with certainty. 
B) The distribution of proceeds from the sale of excess inventory to shareholders in exchange for part of their stock will not satisfy the not essentially equivalent to a dividend test. 
C) A stock redemption pursuant to a partial liquidation cannot be pro rata with respect to the shareholders. 
D) The termination of a business test requires that the distributing corporation actively conducted at least three trades or businesses for at least five years. 
E) None of the above.

Question 9

To qualify a partial liquidation under the termination of a business test,the distribution must consist of the assets of a qualified trade or business.

Accepted Answer

A) True 
 B)False

Question 10

Regardless of any deficit in current E & P,distributions during the year are taxed as dividends to the extent of accumulated E & P.

Accepted Answer

A) True 
 B)False

Question 11

​
Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2017.​
a.Increase
b.Decrease
c.No effect
-Intangible drilling costs deducted currently.

Accepted Answer

The answer of ​
Using the legend provided, classify each statement...

Question 12

In the current year,Carnation Corporation has a § 179 expense of $20,000.As a result,in the current year,taxable income must be increased by $16,000 to determine current E & P.

Accepted Answer

A) True 
 B)False

Question 13

Stacey and Andrew each own one-half of the stock in Parakeet Corporation,a calendar year taxpayer.Cash distributions from Parakeet are: $350,000 to Stacey on April 1 and $150,000 to Andrew on May 1.If Parakeet's current E & P is $60,000,how much is allocated to Andrew's distribution?

Accepted Answer

A) $5,000 
B) $10,000 
C) $18,000 
D) $30,000 
E) None of the above 
A) $5,000 
B) $10,000 
C) $18,000 
D) $30,000 
E) None of the above

Question 14

When is a redemption to pay death taxes under § 303 most advantageous?

Accepted Answer

The principal advantage of a § 303 redem

Question 15

As of January 1,Cassowary Corporation has a deficit in accumulated E & P of $100,000.For the tax year,current E & P (accrued ratably) is $240,000 (prior to any distributions).On July 1,Cassowary Corporation distributes $275,000 to its sole shareholder.The amount of the distribution that is a dividend is:

Accepted Answer

A) $20,000. 
B) $140,000. 
C) $240,000. 
D) $275,000. 
E) None of the above. 
A) $20,000. 
B) $140,000. 
C) $240,000. 
D) $275,000. 
E) None of the above.

Question 16

On January 1,Eagle Corporation (a calendar year taxpayer) has accumulated E & P of $300,000.During the year,Eagle incurs a net loss of $420,000 from operations that accrues ratably.On June 30,Eagle distributes $180,000 to Libby,its sole shareholder,who has a basis in her stock of $112,500.How much of the $180,000 is a dividend to Libby?

Accepted Answer

A) $0 
B) $90,000 
C) $112,500 
D) $180,000 
E) None of the above 
A) $0 
B) $90,000 
C) $112,500 
D) $180,000 
E) None of the above

Question 17

The dividends received deduction has no impact on E & P.

Accepted Answer

A) True 
 B)False

Question 18

Briefly define the term "earnings and profits."

Accepted Answer

In general,earnings and profits (E & P)

Question 19

Which of the following statements is correct with respect to the § 338 election?

Accepted Answer

A) The subsidiary corporation makes the § 338 election. 
B) A qualified stock purchase occurs when a corporation acquires, in a taxable transaction, at least 80% of the stock (voting power and value) of another corporation within an18-month period. 
C) The parent recognizes no gain (loss) as a result of the election. 
D) Gain, but not loss, is recognized by the subsidiary as a result of a deemed sale of its assets. 
E) None of the above. 
A) The subsidiary corporation makes the § 338 election. 
B) A qualified stock purchase occurs when a corporation acquires, in a taxable transaction, at least 80% of the stock (voting power and value) of another corporation within an18-month period. 
C) The parent recognizes no gain (loss) as a result of the election. 
D) Gain, but not loss, is recognized by the subsidiary as a result of a deemed sale of its assets. 
E) None of the above.

Question 20

A corporation that distributes a property dividend must reduce its E & P by the adjusted basis of the property less any liability on the property.

Accepted Answer

A) True 
 B)False

Exam 19: Corporations: Distributions Not in Complete Liquidation

Constructive dividends do not need to satisfy the legal requirements for a dividend as set forth by applicable state law.

Rose Corporation (a calendar year taxpayer) has taxable income of $300,000,and its financial records reflect the following for the year. ​ Rose Corporation's current E & P is:

A distribution from a corporation will be taxable to the recipient shareholders only to the extent of the corporation's E & P.

Dividends paid to shareholders who hold both long and short positions do not qualify for the reduced tax rate available to individuals in certain years.

In applying the § 318 stock attribution rules to a stock redemption,a shareholder is treated as owning the stock of her spouse,children,grandchildren,parents,and siblings.

An increase in the LIFO recapture amount must be added to taxable income to determine E & P.

Which of the following statements is correct with respect to a partial liquidation?

To qualify a partial liquidation under the termination of a business test,the distribution must consist of the assets of a qualified trade or business.

Regardless of any deficit in current E & P,distributions during the year are taxed as dividends to the extent of accumulated E & P.

​ Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2017.​ a.Increase b.Decrease c.No effect -Intangible drilling costs deducted currently.

In the current year,Carnation Corporation has a § 179 expense of $20,000.As a result,in the current year,taxable income must be increased by $16,000 to determine current E & P.

Stacey and Andrew each own one-half of the stock in Parakeet Corporation,a calendar year taxpayer.Cash distributions from Parakeet are: $350,000 to Stacey on April 1 and $150,000 to Andrew on May 1.If Parakeet's current E & P is $60,000,how much is allocated to Andrew's distribution?

When is a redemption to pay death taxes under § 303 most advantageous?

The dividends received deduction has no impact on E & P.

Briefly define the term "earnings and profits."

Which of the following statements is correct with respect to the § 338 election?

A corporation that distributes a property dividend must reduce its E & P by the adjusted basis of the property less any liability on the property.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions in Complete Liquidation and an Overview of Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Rose Corporation (a calendar year taxpayer) has taxable income of $300,000,and its financial records reflect the following for the year. Rose Corporation's current E & P is:

Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2017. a.Increase b.Decrease c.No effect -Intangible drilling costs deducted currently.