Exam 4: Corporate Nonliquidating Distributions

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?

Tomika Corporation has current and accumulated earnings and profits of $0.Tomika distributes $10,000 to its sole shareholder,Alana.What are Tomika's earnings and profits after the distribution?

Identify which of the following statements is true.

Identify which of the following statements is false.

Identify which of the following statements is true.

A corporation distributes land and the related liability in a nonliquidating distribution to a shareholder.The land (a capital asset)has an adjusted basis of $70,000,an FMV of $100,000 and is subject to a mortgage of $120,000.The corporation must recognize

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

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?

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?

Exit Corporation has accumulated E&P of $24,000 at the beginning of the current tax year.Current E&P is $20,000.During the year,the corporation makes the following distributions to its sole shareholder who has a $22,000 basis for her stock. The treatment of the $15,000 August 1 distribution would be

Identify which of the following statements is true.

Payment Corporation has accumulated E&P of $19,000 and current E&P of $28,000.During the year,the corporation makes the following distributions to its sole shareholder: The sole shareholder's basis in her stock is $45,000.What are the tax consequences of the June 1 distribution?

Corporations may always use retained earnings as a substitute for earnings and profits.

Identify which of the following statements is false.

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

Define Sec.306 stock.

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

A shareholder's basis in property distributed as a dividend is its fair market value.

In the current year,Red Corporation has $100,000 of current and accumulated E&P.On March 2,Red Corporation distributes to Randy,a shareholder,a parcel of land (a capital asset)having a $60,000 FMV.The land has a $30,000 adjusted basis (for both tax and E&P purposes)to Red Corporation and is subject to an $8,000 mortgage,which Randy assumes.Assume a 34% marginal corporate tax rate. a)What is the amount and character of the income Randy recognizes as a result of the distribution? b)What is Randy's basis for the land? c)What is the amount and character of Red Corporation's gain or loss as a result of the distribution? d)What effect does the distribution have on Red Corporation's E&P?

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