Question 1

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

Accepted Answer

Stock dividends generally are nontaxable

Question 2

Which of the following requirements must be met for a redemption to be treated as substantially disproportionate?

Accepted Answer

A) The shareholder must own less than 50% of the outstanding stock (in terms of voting power)after the redemption. 
B) After the redemption,the shareholder must own less than 80% of his percentage ownership of voting stock prior to the redemption. 
C) After the redemption,the shareholder must own less than 80% of his percentage ownership of common stock (voting and nonvoting)prior to the redemption. 
D) All of the above must be met. 
A) The shareholder must own less than 50% of the outstanding stock (in terms of voting power)after the redemption. 
B) After the redemption,the shareholder must own less than 80% of his percentage ownership of voting stock prior to the redemption. 
C) After the redemption,the shareholder must own less than 80% of his percentage ownership of common stock (voting and nonvoting)prior to the redemption. 
D) All of the above must be met.

Question 3

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 4

Identify which of the following statements is true.

Accepted Answer

A) The FMV of an obligation is used to determine the E&P reduction when a corporation distributes the obligation to its shareholders. 
B) When appreciated property is distributed to shareholders,E&P must be increased by any gain (net of taxes)recognized due to the property distribution. 
C) 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 net of the FMV of the property distributed minus the gain (net of federal income taxes)recognized due to the property distribution. 
D) Only B and C above are true. 
A) The FMV of an obligation is used to determine the E&P reduction when a corporation distributes the obligation to its shareholders. 
B) When appreciated property is distributed to shareholders,E&P must be increased by any gain (net of taxes)recognized due to the property distribution. 
C) 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 net of the FMV of the property distributed minus the gain (net of federal income taxes)recognized due to the property distribution. 
D) Only B and C above are true.

Question 5

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?

Accepted Answer

A) dividend income 
B) sale transaction 
C) return of capital 
D) some other treatment 
A) dividend income 
B) sale transaction 
C) return of capital 
D) some other treatment

Question 6

Identify which of the following statements is true.

Accepted Answer

A) Generally in a stock redemption,if the shareholder's ownership percentage is substantially reduced,the redemption is treated as a sale. 
B) The family attribution rules of Sec.318 are as inclusive as the family attribution rules of Sec.267. 
C) A 10% shareholder of a corporation is considered to own 10% of any stock that is owned by the corporation under the Sec.318 attribution rules. 
D) All of the above are false. 
A) Generally in a stock redemption,if the shareholder's ownership percentage is substantially reduced,the redemption is treated as a sale. 
B) The family attribution rules of Sec.318 are as inclusive as the family attribution rules of Sec.267. 
C) A 10% shareholder of a corporation is considered to own 10% of any stock that is owned by the corporation under the Sec.318 attribution rules. 
D) All of the above are false.

Question 7

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

Accepted Answer

A) desire by remaining shareholders to retain control 
B) desire by shareholders to reduce the corporate tax liability 
C) Redemption of shares is a good corporate investment. 
D) No outside market exists for the stock. 
A) desire by remaining shareholders to retain control 
B) desire by shareholders to reduce the corporate tax liability 
C) Redemption of shares is a good corporate investment. 
D) No outside market exists for the stock.

Question 8

How does a shareholder classify a distribution for tax purposes?

Accepted Answer

Distributions are treated as f

Question 9

Crossroads Corporation distributes $60,000 to its sole shareholder Harley.Crossroads has earnings and profits of $55,000 and Harley's basis in her stock is $20,000.After the distribution,Harley's basis is

Accepted Answer

A) $5,000. 
B) $15,000. 
C) $20,000. 
D) $60,000. 
A) $5,000. 
B) $15,000. 
C) $20,000. 
D) $60,000.

Question 10

Identify which of the following statements is true.

Accepted Answer

A) Section 179 property must be expensed ratably over a five-year period when computing E&P. 
B) Losses on property sales to related parties are not deductible when computing E&P. 
C) Distributions made out of accumulated E&P are allocated ratably between multiple distributions made during the tax year. 
D) All of the above are false. 
A) Section 179 property must be expensed ratably over a five-year period when computing E&P. 
B) Losses on property sales to related parties are not deductible when computing E&P. 
C) Distributions made out of accumulated E&P are allocated ratably between multiple distributions made during the tax year. 
D) All of the above are false.

Question 11

Identify which of the following statements is true.

Accepted Answer

A) Loans made to shareholders in proportion to their stock ownership in the corporation is evidence that the loans are disguised dividends. 
B) Corporate payments for the shareholder's benefit may be a taxable dividend. 
C) If the shareholder can elect to receive distributing corporation stock or money,the receipt of distributing corporation stock will be a taxable dividend. 
D) All of the above are true. 
A) Loans made to shareholders in proportion to their stock ownership in the corporation is evidence that the loans are disguised dividends. 
B) Corporate payments for the shareholder's benefit may be a taxable dividend. 
C) If the shareholder can elect to receive distributing corporation stock or money,the receipt of distributing corporation stock will be a taxable dividend. 
D) All of the above are true.

Question 12

Joshua owns 100% of Steeler Corporation's stock.Joshua's basis in the stock is $8,000.Steeler Corporation has E&P of $40,000.If Steeler Corporation redeems 60% of Joshua's stock for $50,000,Joshua must report dividend income of

Accepted Answer

A) $0. 
B) $8,000. 
C) $40,000. 
D) $50,000. 
A) $0. 
B) $8,000. 
C) $40,000. 
D) $50,000.

Question 13

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 14

Wills Corporation,which has accumulated a current E&P totaling $65,000,distributes land to its sole shareholder,an individual.The land has an FMV of $75,000 and an adjusted basis of $55,000.The shareholder assumes a $15,000 liability associated with the land.The shareholder will recognize

Accepted Answer

A) $60,000 of dividend income and have a $60,000 basis in the land. 
B) $65,000 of dividend income and have a $75,000 basis in the land. 
C) $60,000 of dividend income and have a $75,000 basis in the land. 
D) $65,000 of dividend income and have a $65,000 basis in the land. 
A) $60,000 of dividend income and have a $60,000 basis in the land. 
B) $65,000 of dividend income and have a $75,000 basis in the land. 
C) $60,000 of dividend income and have a $75,000 basis in the land. 
D) $65,000 of dividend income and have a $65,000 basis in the land.

Question 15

Identify which of the following statements is true.

Accepted Answer

A) If both the current and accumulated E&P have deficit balances,a corporate distribution cannot be characterized as a dividend. 
B) The shareholder's basis in property received in a nonliquidating distribution is the property's FMV reduced by liabilities assumed by the shareholder. 
C) A corporation recognizes gain when distributing money as a dividend to its shareholders. 
D) All of the above are false. 
A) If both the current and accumulated E&P have deficit balances,a corporate distribution cannot be characterized as a dividend. 
B) The shareholder's basis in property received in a nonliquidating distribution is the property's FMV reduced by liabilities assumed by the shareholder. 
C) A corporation recognizes gain when distributing money as a dividend to its shareholders. 
D) All of the above are false.

Question 16

Identify which of the following statements is true.

Accepted Answer

A) Only stock included in the decedent's gross estate can be redeemed under the Sec.303 provisions. 
B) If the stock redemption proceeds are used to pay either the estate's funeral and administrative expenses or death taxes,the redemption can qualify for capital gains treatment under Sec.303. 
C) Usually,a stock redemption qualifying under Sec.303 as a redemption to pay death taxes will result in little or no gain to the redeeming shareholder. 
D) All of the above are true. 
A) Only stock included in the decedent's gross estate can be redeemed under the Sec.303 provisions. 
B) If the stock redemption proceeds are used to pay either the estate's funeral and administrative expenses or death taxes,the redemption can qualify for capital gains treatment under Sec.303. 
C) Usually,a stock redemption qualifying under Sec.303 as a redemption to pay death taxes will result in little or no gain to the redeeming shareholder. 
D) All of the above are true.

Question 17

Identify which of the following statements is true.

Accepted Answer

A) The distribution of preferred stock as a stock dividend will result in income or a taxable gain being recognized by the shareholder on the date of the distribution if the stock is Sec.306 stock. 
B) Corporations without E&P can distribute preferred stock as a stock dividend that is Sec.306 stock. 
C) Two corporations are considered to be brother-sister corporations for purposes of the Sec.304 redemption rules if one shareholder owns more than 50% of each corporation. 
D) All of the above are false. 
A) The distribution of preferred stock as a stock dividend will result in income or a taxable gain being recognized by the shareholder on the date of the distribution if the stock is Sec.306 stock. 
B) Corporations without E&P can distribute preferred stock as a stock dividend that is Sec.306 stock. 
C) Two corporations are considered to be brother-sister corporations for purposes of the Sec.304 redemption rules if one shareholder owns more than 50% of each corporation. 
D) All of the above are false.

Question 18

Two corporations are considered to be brother-sister corporations for purposes of the Sec.304 redemption rules if one shareholder owns more than 50% of each corporation.

Accepted Answer

A) True 
 B)False

Question 19

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 natu

Question 20

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.

Accepted Answer

a)$60,000 dividend to Wilhelmina;$15,000

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

Which of the following requirements must be met for a redemption to be treated as substantially disproportionate?

Identify which of the following statements is true.

Identify which of the following statements is true.

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

How does a shareholder classify a distribution for tax purposes?

Crossroads Corporation distributes $60,000 to its sole shareholder Harley.Crossroads has earnings and profits of $55,000 and Harley's basis in her stock is $20,000.After the distribution,Harley's basis is

Identify which of the following statements is true.

Identify which of the following statements is true.

Joshua owns 100% of Steeler Corporation's stock.Joshua's basis in the stock is $8,000.Steeler Corporation has E&P of $40,000.If Steeler Corporation redeems 60% of Joshua's stock for $50,000,Joshua must report dividend income of

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

Wills Corporation,which has accumulated a current E&P totaling $65,000,distributes land to its sole shareholder,an individual.The land has an FMV of $75,000 and an adjusted basis of $55,000.The shareholder assumes a $15,000 liability associated with the land.The shareholder will recognize

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

Two corporations are considered to be brother-sister corporations for purposes of the Sec.304 redemption rules if one shareholder owns more than 50% of each corporation.

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?

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

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Exam 4: Corporate Nonliquidating Distributions

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

Which of the following requirements must be met for a redemption to be treated as substantially disproportionate?

Identify which of the following statements is true.

Identify which of the following statements is true.

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

How does a shareholder classify a distribution for tax purposes?

Crossroads Corporation distributes $60,000 to its sole shareholder Harley.Crossroads has earnings and profits of $55,000 and Harley's basis in her stock is $20,000.After the distribution,Harley's basis is

Identify which of the following statements is true.

Identify which of the following statements is true.

Joshua owns 100% of Steeler Corporation's stock.Joshua's basis in the stock is $8,000.Steeler Corporation has E&P of $40,000.If Steeler Corporation redeems 60% of Joshua's stock for $50,000,Joshua must report dividend income of

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

Wills Corporation,which has accumulated a current E&P totaling $65,000,distributes land to its sole shareholder,an individual.The land has an FMV of $75,000 and an adjusted basis of $55,000.The shareholder assumes a $15,000 liability associated with the land.The shareholder will recognize

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

Two corporations are considered to be brother-sister corporations for purposes of the Sec.304 redemption rules if one shareholder owns more than 50% of each corporation.

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?

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

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters