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. B

Question 2

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

Accepted Answer

A) $0. 
B) $1,000. 
C) $5,000. 
D) none of the above 
A) $0. 
B) $1,000. 
C) $5,000. 
D) none of the above A

Question 3

Identify which of the following statements is false.

Accepted Answer

A) For E&P dividend distribution purposes,property as defined in Sec.317(a)includes money. 
B) The function of E&P is to provide a measure of a corporation's economic ability to pay dividends. 
C) At formation,a corporation's E&P depends on the amount of capital contributed by the shareholders. 
D) Adjustments to taxable income when computing E&P do not include tax-exempt interest. 
A) For E&P dividend distribution purposes,property as defined in Sec.317(a)includes money. 
B) The function of E&P is to provide a measure of a corporation's economic ability to pay dividends. 
C) At formation,a corporation's E&P depends on the amount of capital contributed by the shareholders. 
D) Adjustments to taxable income when computing E&P do not include tax-exempt interest. C

Question 4

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?

Accepted Answer

A) dividend; dividend; return of capital 
B) dividend; return of capital; return of capital 
C) return of capital; dividend; dividend 
D) return of capital; return of capital; dividend 
A) dividend; dividend; return of capital 
B) dividend; return of capital; return of capital 
C) return of capital; dividend; dividend 
D) return of capital; return of capital; dividend

Question 5

Maury Corporation has 200 shares of stock outstanding as follows:
   How many shares is Amy deemed to own under the Sec.318 attribution rules?

Accepted Answer

Amy owns: 30 shares directly
5 shares th

Question 6

Peach Corporation was formed four years ago.Its current E&P (or E&P deficit)and distributions for the most recent four years are as follows:
   What is Peach's accumulated E&P at the beginning of 2006,2007,2008,and 2009?

Accepted Answer

@#IMG-DLM& ^a A distribution does not red

Question 7

Maple Corporation distributes land to a noncorporate shareholder.Explain how the following items are computed:
a)the amount of the distribution.
b)the amount of the dividend.
c)the basis of the land to the shareholder.
d)the start of the holding period for the land.
How would your answers change if the distribution was made to a corporate shareholder?

Accepted Answer

a)The distribution amount is the FMV of

Question 8

Current E&P does not include

Accepted Answer

A) tax-exempt interest income. 
B) life insurance proceeds where the corporation is the beneficiary. 
C) federal income tax refunds from prior years. 
D) All of the above are included. 
A) tax-exempt interest income. 
B) life insurance proceeds where the corporation is the beneficiary. 
C) federal income tax refunds from prior years. 
D) All of the above are included.

Question 9

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 10

Boris owns 60 of the 100 shares outstanding of Bread Corporation stock and 80 of the 100 shares of Butter Corporation stock.His basis in the Bread shares is $10,000 and his basis in his Butter shares is $5,000.Boris sells 30 of his Bread Corporation shares to Butter Corporation for $25,000.Bread Corporation has E&P of $20,000 and Butter Corporation has E&P of $40,000.In applying the substantially disproportionate test to determine if this is a sale or a dividend,Boris is treated as owning how many shares of Bread after the sale?

Accepted Answer

A) 30 shares 
B) 54 shares 
C) 60 shares 
D) 80 shares 
A) 30 shares 
B) 54 shares 
C) 60 shares 
D) 80 shares

Question 11

Which of the following statements best describes a bootstrap acquisition?

Accepted Answer

A) The shareholder sells part of his or her stock to a purchaser and then the corporation redeems the original shareholder's remaining stock. 
B) The shareholder sells his stock in exchange for cash and debt. 
C) The shareholder exchanges his stock for stock of a different corporation. 
D) none of the above 
A) The shareholder sells part of his or her stock to a purchaser and then the corporation redeems the original shareholder's remaining stock. 
B) The shareholder sells his stock in exchange for cash and debt. 
C) The shareholder exchanges his stock for stock of a different corporation. 
D) none of the above

Question 12

What must be reported to the IRS by corporations when nondividend distributions are made to its shareholders?

Accepted Answer

The basic purpose of Form 5452,Corporate

Question 13

Gould Corporation distributes land (a capital asset)worth $90,000 to Gerry,a shareholder.The land has a $30,000 basis to Gould.What is the amount and character of the gain or loss recognized by Gould?

Accepted Answer

Gould recognizes a $

Question 14

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 FMV of the property distributed and increased by the gain (net of federal income taxes)recognized due to the property distribution.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Green Corporation is a calendar-year taxpayer.All of the stock is owned by Evan.His basis for the stock is $35,000.On March 1 (of a non-leap year),Green Corporation distributes $120,000 to Evan.Determine the tax consequences of the cash distribution to Evan in each of the following independent situations:

Accepted Answer

a)$120,000 is a dividend to Evan.
b)$50,

Question 17

Alice owns 56% of Daisy Corporation's stock and 50% of May Corporation's stock.Alice sells one-half of her interest in May Corporation to Daisy Corporation for $30,000.The E&P balances of Daisy and May are $25,000 and $35,000,respectively.Alice's basis in her Daisy stock is $40,000 and her basis in the May stock is $38,000.What are the tax consequences of the transaction?

Accepted Answer

The transaction is recast as a redemptio

Question 18

Which of the following statements is not true about redemptions?

Accepted Answer

A) Redemptions of Sec.306 stock are generally treated as dividends to the shareholder. 
B) A sale of stock from one controlled corporation to another controlled corporation is treated as a redemption. 
C) Redemptions to pay death taxes are treated as dividends to the shareholder. 
D) A distribution in redemption of stock is generally a dividend. 
A) Redemptions of Sec.306 stock are generally treated as dividends to the shareholder. 
B) A sale of stock from one controlled corporation to another controlled corporation is treated as a redemption. 
C) Redemptions to pay death taxes are treated as dividends to the shareholder. 
D) A distribution in redemption of stock is generally a dividend.

Question 19

Corporate distributions that exceed earnings and profits are always capital gains.

Accepted Answer

A) True 
 B)False

Question 20

Why are stock dividends generally nontaxable? Under what circumstances are stock dividends taxable?

Accepted Answer

Stock dividends generally are nontaxable

Exam 4: Corporate Nonliquidating Distributions

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

Identify which of the following statements is false.

Maury Corporation has 200 shares of stock outstanding as follows: How many shares is Amy deemed to own under the Sec.318 attribution rules?

Peach Corporation was formed four years ago.Its current E&P (or E&P deficit)and distributions for the most recent four years are as follows: What is Peach's accumulated E&P at the beginning of 2006,2007,2008,and 2009?

Current E&P does not include

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

Which of the following statements best describes a bootstrap acquisition?

What must be reported to the IRS by corporations when nondividend distributions are made to its shareholders?

Gould Corporation distributes land (a capital asset)worth $90,000 to Gerry,a shareholder.The land has a $30,000 basis to Gould.What is the amount and character of the gain or loss recognized by Gould?

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 FMV of the property distributed and increased by the gain (net of federal income taxes)recognized due to the property distribution.

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?

Which of the following statements is not true about redemptions?

Corporate distributions that exceed earnings and profits are always capital gains.

Why are stock dividends generally nontaxable? Under what circumstances are stock dividends taxable?

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

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Ustaxation of Foreign-Related Transactions

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters