Exam 4: Corporate Nonliquidating Distributions

Identify which of the following statements is true.

A corporation distributes land and the related liability to Meg,its sole shareholder.The land has an FMV of $60,000 and is subject to a liability of $70,000.The corporation has current and accumulated E&P of $80,000.The corporation's adjusted basis for the property is $70,000.What effect does the transaction have on the corporation?

Omega Corporation is formed in 2006.Its current E&P and distributions for each year through 2010 are as follows: Is the distribution made from current or accumulated E&P? At the beginning of 2011,what is accumulated E&P?

White Corporation is a calendar-year taxpayer.Wilhelmina owns all of its stock.Her basis for the stock is $25,000.On March 1 of the current year (not a leap year),White Corporation distributes $60,000 to Wilhelmina.Determine the tax consequences of the cash distribution to Wilhelmina in each of the following independent situations: a)Current E&P $15,000,accumulated E&P $50,000. b)Current E&P $25,000,accumulated E&P $(25,000). c)Current E&P ($36,500),accumulated E&P $65,000. d)Current E&P ($10,000),accumulated E&P $(25,000).

The gross estate of a decedent contains $2,000,000 cash and 100% of Davis Corporation stock worth $600,000.Funeral and administrative expenses and state death taxes allowable as estate tax deductions amount to $400,000.The estate owes no other liabilities.The decedent's Davis stock can be

River Corporation's taxable income is $25,000,after deducting a $5,000 NOL carryover from last year and after claiming a $10,000 dividends-received deduction.What is the current E&P?

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

Which of the following is not a condition that permits a stock redemption to be treated as a sale?

What is a stock redemption? What are some of the reasons for making a stock redemption? Why are some redemptions treated as sales and others as dividends?

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?

Checkers Corporation has a single class of common stock outstanding.Bert owns 100 shares,which he purchased five years ago for $200,000.In the current year,when the stock is worth $2,500 per share,Checkers Corporation declares a 10% stock dividend payable in common stock.Bert receives ten additional shares on December 10 of the current year.On January 25 of next year he sells all ten shares for $30,000. a)How much income must Bert recognize when he receives the stock dividend? b)How much gain or loss must Bert recognize when he sells the ten shares he received as a stock dividend?

In 2010,Tru Corporation deducted $5,000 of bad debts.It received no tax benefit from the deduction because it had an NOL in 2010 that it was unable to carry back or forward.In 2011,Tru recovered $4,000 of the amount due. a)What amount must Tru include in income in 2011? b)What effect does the $4,000 have on E&P in 2011,if any?

Identify which of the following statements is true.