Question 1

In determining whether a distribution qualifies as a § 303 redemption to pay death taxes,the stock attribution rules must be applied.

Accepted Answer

A) True 
 B)False

Question 2

The Code treats corporate distributions that are a return of a shareholder's investment as sales or exchanges and corporate distributions that are a return from a shareholder's investment as dividends.

Accepted Answer

A) True 
 B)False

Question 3

The rules used to determine the taxability of stock dividends also apply to distributions of stock rights.

Accepted Answer

A) True 
 B)False

Question 4

Copper Corporation (E & P of $1.2 million) distributes land (basis of $410,000,fair market value of $650,000) to Lauren,a shareholder,to carry out a qualifying stock redemption.Lauren had a basis of $90,000 in the shares redeemed.Which of the following is an incorrect statement regarding the redemption?

Accepted Answer

A) If the land is distributed subject to a $500,000 liability, Copper Corporation will recognize a gain of $240,000. 
B) If the land is distributed subject to a $500,000 liability, Lauren will have a basis in the land of $650,000. 
C) If the land is distributed subject to a $500,000 liability, Lauren will recognize a gain of $60,000. 
D) If the land is distributed subject to a $700,000 liability, Copper Corporation will recognize a gain of $290,000. 
E) None of the above. 
A) If the land is distributed subject to a $500,000 liability, Copper Corporation will recognize a gain of $240,000. 
B) If the land is distributed subject to a $500,000 liability, Lauren will have a basis in the land of $650,000. 
C) If the land is distributed subject to a $500,000 liability, Lauren will recognize a gain of $60,000. 
D) If the land is distributed subject to a $700,000 liability, Copper Corporation will recognize a gain of $290,000. 
E) None of the above.

Question 5

Gold Corporation has accumulated E & P of $2 million as of January 1 of the current year.During the year,it expects to have earnings from operations of $1,680,000 and to distribute $900,000 in cash to shareholders.Gold Corporation also expects to sell an asset for a loss of $2 million.Thus,it anticipates incurring a deficit of $320,000 for the year.What can Gold do to minimize the amount of dividend income to its shareholders?

Accepted Answer

Gold should recognize the loss as soon a

Question 6

Which of the following is an incorrect statement regarding the application of the § 318 stock attribution rules?

Accepted Answer

A) An individual is not deemed to own the shares owned by his or her siblings. 
B) Stock owned by an estate is deemed to be owned in full by a beneficiary. 
C) Stock owned by any shareholder owning 50% or more of a corporation's stock is deemed to be owned in full by the corporation. 
D) Stock owned by a partnership is deemed to be owned proportionately by a partner. 
E) None of the above. 
A) An individual is not deemed to own the shares owned by his or her siblings. 
B) Stock owned by an estate is deemed to be owned in full by a beneficiary. 
C) Stock owned by any shareholder owning 50% or more of a corporation's stock is deemed to be owned in full by the corporation. 
D) Stock owned by a partnership is deemed to be owned proportionately by a partner. 
E) None of the above.

Question 7

Daisy Corporation is the sole shareholder of Ostrich Corporation,which it hopes to sell within the next three years.The Ostrich stock (basis of $25 million) is currently worth $30 million,but Daisy believes that it would be easier to find a buyer if it was worth less.To lower the value of its stock,Ostrich distributes $4 million cash to Daisy (sufficient E & P exists to cover the distribution).At a later date,Daisy sells Ostrich for $26 million.
​
a.What are the tax consequences to Daisy on the sale?
b.​What would be the tax consequences if Ostrich had not first distributed the $4 million in cash and Daisy sold the Ostrich stock for $30 million?

Accepted Answer

The answer of Daisy Corporation is the sole shareholder of...

Question 8

Puffin Corporation's 2,000 shares outstanding are owned as follows: Paul,800 shares; Sandra (Paul's sister),800 shares; and Greta (Paul's granddaughter),400 shares.During the current year,Puffin (E & P of $1 million) redeemed 600 shares of Paul's stock for $100,000.If Paul had acquired the 600 shares five years ago for $30,000,he will have a long-term capital gain of $70,000 from the redemption.

Accepted Answer

A) True 
 B)False

Question 9

Thistle Corporation declares a nontaxable dividend payable in rights to subscribe to common stock.One right and $25 entitle the holder to subscribe to one share of stock.One right is issued for each share of stock held.Annette,a shareholder,owns 200 shares of stock that she purchased five years ago for $3,000.At the date of distribution of the rights,the market values were $50 per share for the stock and $25 for a right.Annette received 200 rights.She exercises 160 rights and purchases 160 additional shares of stock.She sells the remaining 40 rights for $1,080.What are the tax consequences to Annette?

Accepted Answer

Because the fair market value of the rig

Question 10

Dividends taxed as ordinary income are considered investment income for purposes of the investment interest expense limitation.

Accepted Answer

A) True 
 B)False

Question 11

Steve has a capital loss carryover in the current year of $30,000.He owns 3,000 shares of stock in Carmine Corporation,which he purchased six years ago for $20 per share.In the current year,Carmine Corporation (E & P of $750,000) redeems all of his shares for $140,000.Steve is in the 33% tax bracket.What is his income tax liability with respect to the corporate distribution if:
a.The redemption qualifies for sale or exchange treatment, and Steve has no other transactions in the current year involving capital assets?
b.The redemption does not qualify for sale or exchange treatment?

Accepted Answer

The answer of Steve has a capital loss carryover in...

Question 12

Rust Corporation distributes property to its sole shareholder,Andre.The property has a fair market value of $350,000,an adjusted basis of $205,000,and is subject to a liability of $220,000.Current E & P is $500,000.With respect to the distribution,which of the following statements is correct?

Accepted Answer

A) Rust has a gain of $15,000 and Andre has dividend income of $350,000. 
B) Rust has a gain of $145,000 and Andre's basis in the distributed property is $130,000. 
C) Rust has a gain of $130,000 and Andre's basis in the distributed property is $350,000. 
D) Rust has a gain of $145,000 and Andre has dividend income of $130,000. 
E) None of the above. 
A) Rust has a gain of $15,000 and Andre has dividend income of $350,000. 
B) Rust has a gain of $145,000 and Andre's basis in the distributed property is $130,000. 
C) Rust has a gain of $130,000 and Andre's basis in the distributed property is $350,000. 
D) Rust has a gain of $145,000 and Andre has dividend income of $130,000. 
E) None of the above.

Question 13

During the year,Blue Corporation distributes land to its sole shareholder.If the fair market value of the land is less than its adjusted basis,Blue will not be able to recognize a loss on the distribution.

Accepted Answer

A) True 
 B)False

Question 14

​
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
-Gain realized (but not recognized) on a like-kind exchange.

Accepted Answer

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

Question 15

Tracy and Lance,equal shareholders in Macaw Corporation,receive $600,000 each in distributions on December 31 of the current year.Macaw's current year taxable income is $1 million and it has no accumulated E & P.Last year,Macaw sold an appreciated asset for $1,200,000 (basis of $400,000).Payment for one-half of the sale of the asset was made this year.How much of Tracy's distribution will be taxed as a dividend?

Accepted Answer

A) $0 
B) $300,000 
C) $500,000 
D) $600,000 
E) None of the above 
A) $0 
B) $300,000 
C) $500,000 
D) $600,000 
E) None of the above

Question 16

Briefly describe the rationale for the reduced tax rate on dividends for individual taxpayers.

Accepted Answer

The double tax on dividends creates a nu

Question 17

Matching
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
-Gain realized,but not recognized,in a like-kind exchange transaction in 2017.

Accepted Answer

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

Question 18

Ivory Corporation (E & P of $1 million) has 2,000 shares of common stock outstanding owned by unrelated parties as follows: Veronica,1,000 shares,and Tommie,1,000 shares.Veronica and Tommie each paid $150 per share for the Ivory stock 12 years ago.In May of the current year,Ivory distributes land held as an investment (basis of $180,000,fair market value of $390,000) to Veronica in redemption of 350 of her shares.
a.What are the tax results to Veronica on the redemption of her Ivory stock?
b.What are the tax results to Ivory Corporation on the distribution of the land?

Accepted Answer

The answer of Ivory Corporation (E & P of $1...

Question 19

For purposes of a partial liquidation,a distribution is not essentially equivalent to a dividend if it results in a genuine contraction of the business of the corporation.

Accepted Answer

A) True 
 B)False

Question 20

A corporate shareholder that receives a constructive dividend cannot apply a dividends received deduction to the distribution.

Accepted Answer

A) True 
 B)False

In determining whether a distribution qualifies as a § 303 redemption to pay death taxes,the stock attribution rules must be applied.

The Code treats corporate distributions that are a return of a shareholder's investment as sales or exchanges and corporate distributions that are a return from a shareholder's investment as dividends.

The rules used to determine the taxability of stock dividends also apply to distributions of stock rights.

Which of the following is an incorrect statement regarding the application of the § 318 stock attribution rules?

Dividends taxed as ordinary income are considered investment income for purposes of the investment interest expense limitation.

Rust Corporation distributes property to its sole shareholder,Andre.The property has a fair market value of $350,000,an adjusted basis of $205,000,and is subject to a liability of $220,000.Current E & P is $500,000.With respect to the distribution,which of the following statements is correct?

During the year,Blue Corporation distributes land to its sole shareholder.If the fair market value of the land is less than its adjusted basis,Blue will not be able to recognize a loss on the distribution.

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 -Gain realized (but not recognized) on a like-kind exchange.

Briefly describe the rationale for the reduced tax rate on dividends for individual taxpayers.

Matching 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 -Gain realized,but not recognized,in a like-kind exchange transaction in 2017.

For purposes of a partial liquidation,a distribution is not essentially equivalent to a dividend if it results in a genuine contraction of the business of the corporation.

A corporate shareholder that receives a constructive dividend cannot apply a dividends received deduction to the distribution.

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

Exam 19: Corporations: Distributions Not in Complete Liquidation

In determining whether a distribution qualifies as a § 303 redemption to pay death taxes,the stock attribution rules must be applied.

The Code treats corporate distributions that are a return of a shareholder's investment as sales or exchanges and corporate distributions that are a return from a shareholder's investment as dividends.

The rules used to determine the taxability of stock dividends also apply to distributions of stock rights.

Which of the following is an incorrect statement regarding the application of the § 318 stock attribution rules?

Dividends taxed as ordinary income are considered investment income for purposes of the investment interest expense limitation.

Rust Corporation distributes property to its sole shareholder,Andre.The property has a fair market value of $350,000,an adjusted basis of $205,000,and is subject to a liability of $220,000.Current E & P is $500,000.With respect to the distribution,which of the following statements is correct?

During the year,Blue Corporation distributes land to its sole shareholder.If the fair market value of the land is less than its adjusted basis,Blue will not be able to recognize a loss on the distribution.

​ 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 -Gain realized (but not recognized) on a like-kind exchange.

Briefly describe the rationale for the reduced tax rate on dividends for individual taxpayers.

Matching 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 -Gain realized,but not recognized,in a like-kind exchange transaction in 2017.

For purposes of a partial liquidation,a distribution is not essentially equivalent to a dividend if it results in a genuine contraction of the business of the corporation.

A corporate shareholder that receives a constructive dividend cannot apply a dividends received deduction to the distribution.

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

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 -Gain realized (but not recognized) on a like-kind exchange.