Chapter c 6 liquidating distributions


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chapter c 6 liquidating distributions-44

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Unrelated individuals own the remaining 40 percent. Azul Corporation owns 50 percent of Verde Corporation. Compensation paid to a shareholder/employee of the corporation 28. Refund of prior year taxes for an accrual method taxpayer 34. Au Sable Corporation reported taxable income of 0,000 in 20X3 and paid federal income taxes of 2,000. The corporation’s current earnings and profits for 20X3 would be: A. Tar Heel Corporation had current and accumulated E&P of 0,000 at December 31 20X3.

For a stock redemption to be treated as an exchange under the “substantially disproportionate” rule, Tammy must reduce her stock ownership to below 48 percent. Brothers and sisters are considered “family” under the stock attribution rules that apply to stock redemptions. Under the attribution rules applying to stock redemptions, Diego is treated as owning 15 percent of Verde Corporation. The “family attribution” rules are automatically waived in a complete redemption of a shareholder’s stock. Battle Corporation redeems 20 percent of its stock for 0,000 in a stock redemption that is treated as an exchange by the shareholders. Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder? The distribution is a dividend to the extent of the corporation’s earnings and profits, then a return of capital, and finally gain from sale of stock. The distribution is a return of capital, then a dividend to the extent of the corporation’s earnings and profits, and finally gain from sale of stock. The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation’s earnings and profits. The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation’s earnings and profits or a return of capital, followed by gain from sale of stock. Which of the following statements best describes current earnings and profits? Current earnings and profits is another name for a corporation’s retained earnings on its balance sheet. Current earnings and profits is a precisely defined tax term in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is an ill-defined tax concept in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is a conceptual tax concept with no definition in the Internal Revenue Code. Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend? A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution. A distribution can never be a dividend if current earnings and profits are negative. A distribution will be a dividend if current earnings and profits for the year are positive, even if accumulated earnings and profits are negative. A distribution will never be a dividend if current earnings and profits for the year are negative, even if accumulated earnings and profits is positive. A calendar-year corporation has positive current E&P of 0 and accumulated negative E&P of

Unrelated individuals own the remaining 40 percent. Azul Corporation owns 50 percent of Verde Corporation. Compensation paid to a shareholder/employee of the corporation 28. Refund of prior year taxes for an accrual method taxpayer 34. Au Sable Corporation reported taxable income of $800,000 in 20X3 and paid federal income taxes of $272,000. The corporation’s current earnings and profits for 20X3 would be: A. Tar Heel Corporation had current and accumulated E&P of $500,000 at December 31 20X3.For a stock redemption to be treated as an exchange under the “substantially disproportionate” rule, Tammy must reduce her stock ownership to below 48 percent. Brothers and sisters are considered “family” under the stock attribution rules that apply to stock redemptions. Under the attribution rules applying to stock redemptions, Diego is treated as owning 15 percent of Verde Corporation. The “family attribution” rules are automatically waived in a complete redemption of a shareholder’s stock. Battle Corporation redeems 20 percent of its stock for $100,000 in a stock redemption that is treated as an exchange by the shareholders. Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder? The distribution is a dividend to the extent of the corporation’s earnings and profits, then a return of capital, and finally gain from sale of stock. The distribution is a return of capital, then a dividend to the extent of the corporation’s earnings and profits, and finally gain from sale of stock. The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation’s earnings and profits. The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation’s earnings and profits or a return of capital, followed by gain from sale of stock. Which of the following statements best describes current earnings and profits? Current earnings and profits is another name for a corporation’s retained earnings on its balance sheet. Current earnings and profits is a precisely defined tax term in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is an ill-defined tax concept in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is a conceptual tax concept with no definition in the Internal Revenue Code. Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend? A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution. A distribution can never be a dividend if current earnings and profits are negative. A distribution will be a dividend if current earnings and profits for the year are positive, even if accumulated earnings and profits are negative. A distribution will never be a dividend if current earnings and profits for the year are negative, even if accumulated earnings and profits is positive. A calendar-year corporation has positive current E&P of $500 and accumulated negative E&P of $1,200. The distribution will not be a dividend because total earnings and profits is a negative $700. The distribution may be a dividend, depending on whether total earnings and profits at the date of the distribution is positive. The distribution will be a dividend because current earnings and profits are positive and exceed the distribution. A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in earnings and profits. A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. $500 of the distribution will be a dividend because total earnings and profits is $500. $0 of the distribution will be a dividend because current earnings and profits are negative. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. Which of these items is not an adjustment to taxable income or net loss to compute current E&P? Grand River Corporation reported taxable income of $500,000 in 20X3 and paid federal income taxes of $170,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 20X2 of $50,000. The corporation’s current earnings and profits for 20X3 would be: A. On December 31, the company made a distribution of land to its sole shareholder, William Roy.Due to the $6,000 payment, Teresa recognizes a A) $6,000 long-term capital loss. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. 57) During 2007, Track Corporation distributes property to Cindy as part of a complete liquidation.Gary's basis in the Key stock (a capital asset) surrendered is $120,000. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis.B) a loss of $2,000 last year and a loss of $2,000 this year. D) none of the above 54) Barbara owns 100 shares of Bond Corporation stock with a basis of $40,000.Barbara receives two liquidating distributions, including $16,000 paid last year and $20,000 paid in the current year. 55) Hope Corporation was liquidated four years ago.

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Unrelated individuals own the remaining 40 percent. Azul Corporation owns 50 percent of Verde Corporation. Compensation paid to a shareholder/employee of the corporation 28. Refund of prior year taxes for an accrual method taxpayer 34. Au Sable Corporation reported taxable income of $800,000 in 20X3 and paid federal income taxes of $272,000. The corporation’s current earnings and profits for 20X3 would be: A. Tar Heel Corporation had current and accumulated E&P of $500,000 at December 31 20X3.

For a stock redemption to be treated as an exchange under the “substantially disproportionate” rule, Tammy must reduce her stock ownership to below 48 percent. Brothers and sisters are considered “family” under the stock attribution rules that apply to stock redemptions. Under the attribution rules applying to stock redemptions, Diego is treated as owning 15 percent of Verde Corporation. The “family attribution” rules are automatically waived in a complete redemption of a shareholder’s stock. Battle Corporation redeems 20 percent of its stock for $100,000 in a stock redemption that is treated as an exchange by the shareholders. Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder? The distribution is a dividend to the extent of the corporation’s earnings and profits, then a return of capital, and finally gain from sale of stock. The distribution is a return of capital, then a dividend to the extent of the corporation’s earnings and profits, and finally gain from sale of stock. The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation’s earnings and profits. The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation’s earnings and profits or a return of capital, followed by gain from sale of stock. Which of the following statements best describes current earnings and profits? Current earnings and profits is another name for a corporation’s retained earnings on its balance sheet. Current earnings and profits is a precisely defined tax term in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is an ill-defined tax concept in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is a conceptual tax concept with no definition in the Internal Revenue Code. Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend? A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution. A distribution can never be a dividend if current earnings and profits are negative. A distribution will be a dividend if current earnings and profits for the year are positive, even if accumulated earnings and profits are negative. A distribution will never be a dividend if current earnings and profits for the year are negative, even if accumulated earnings and profits is positive. A calendar-year corporation has positive current E&P of $500 and accumulated negative E&P of $1,200. The distribution will not be a dividend because total earnings and profits is a negative $700. The distribution may be a dividend, depending on whether total earnings and profits at the date of the distribution is positive. The distribution will be a dividend because current earnings and profits are positive and exceed the distribution. A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in earnings and profits. A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. $500 of the distribution will be a dividend because total earnings and profits is $500. $0 of the distribution will be a dividend because current earnings and profits are negative. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. Which of these items is not an adjustment to taxable income or net loss to compute current E&P? Grand River Corporation reported taxable income of $500,000 in 20X3 and paid federal income taxes of $170,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 20X2 of $50,000. The corporation’s current earnings and profits for 20X3 would be: A. On December 31, the company made a distribution of land to its sole shareholder, William Roy.

Due to the $6,000 payment, Teresa recognizes a A) $6,000 long-term capital loss. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. 57) During 2007, Track Corporation distributes property to Cindy as part of a complete liquidation.

Gary's basis in the Key stock (a capital asset) surrendered is $120,000. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis.

,200. The distribution will not be a dividend because total earnings and profits is a negative 0. The distribution may be a dividend, depending on whether total earnings and profits at the date of the distribution is positive. The distribution will be a dividend because current earnings and profits are positive and exceed the distribution. A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in earnings and profits. A calendar-year corporation has negative current E&P of 0 and accumulated positive E&P of

Unrelated individuals own the remaining 40 percent. Azul Corporation owns 50 percent of Verde Corporation. Compensation paid to a shareholder/employee of the corporation 28. Refund of prior year taxes for an accrual method taxpayer 34. Au Sable Corporation reported taxable income of $800,000 in 20X3 and paid federal income taxes of $272,000. The corporation’s current earnings and profits for 20X3 would be: A. Tar Heel Corporation had current and accumulated E&P of $500,000 at December 31 20X3.For a stock redemption to be treated as an exchange under the “substantially disproportionate” rule, Tammy must reduce her stock ownership to below 48 percent. Brothers and sisters are considered “family” under the stock attribution rules that apply to stock redemptions. Under the attribution rules applying to stock redemptions, Diego is treated as owning 15 percent of Verde Corporation. The “family attribution” rules are automatically waived in a complete redemption of a shareholder’s stock. Battle Corporation redeems 20 percent of its stock for $100,000 in a stock redemption that is treated as an exchange by the shareholders. Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder? The distribution is a dividend to the extent of the corporation’s earnings and profits, then a return of capital, and finally gain from sale of stock. The distribution is a return of capital, then a dividend to the extent of the corporation’s earnings and profits, and finally gain from sale of stock. The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation’s earnings and profits. The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation’s earnings and profits or a return of capital, followed by gain from sale of stock. Which of the following statements best describes current earnings and profits? Current earnings and profits is another name for a corporation’s retained earnings on its balance sheet. Current earnings and profits is a precisely defined tax term in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is an ill-defined tax concept in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is a conceptual tax concept with no definition in the Internal Revenue Code. Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend? A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution. A distribution can never be a dividend if current earnings and profits are negative. A distribution will be a dividend if current earnings and profits for the year are positive, even if accumulated earnings and profits are negative. A distribution will never be a dividend if current earnings and profits for the year are negative, even if accumulated earnings and profits is positive. A calendar-year corporation has positive current E&P of $500 and accumulated negative E&P of $1,200. The distribution will not be a dividend because total earnings and profits is a negative $700. The distribution may be a dividend, depending on whether total earnings and profits at the date of the distribution is positive. The distribution will be a dividend because current earnings and profits are positive and exceed the distribution. A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in earnings and profits. A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. $500 of the distribution will be a dividend because total earnings and profits is $500. $0 of the distribution will be a dividend because current earnings and profits are negative. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. Which of these items is not an adjustment to taxable income or net loss to compute current E&P? Grand River Corporation reported taxable income of $500,000 in 20X3 and paid federal income taxes of $170,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 20X2 of $50,000. The corporation’s current earnings and profits for 20X3 would be: A. On December 31, the company made a distribution of land to its sole shareholder, William Roy.Due to the $6,000 payment, Teresa recognizes a A) $6,000 long-term capital loss. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. 57) During 2007, Track Corporation distributes property to Cindy as part of a complete liquidation.Gary's basis in the Key stock (a capital asset) surrendered is $120,000. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis.B) a loss of $2,000 last year and a loss of $2,000 this year. D) none of the above 54) Barbara owns 100 shares of Bond Corporation stock with a basis of $40,000.Barbara receives two liquidating distributions, including $16,000 paid last year and $20,000 paid in the current year. 55) Hope Corporation was liquidated four years ago.

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Unrelated individuals own the remaining 40 percent. Azul Corporation owns 50 percent of Verde Corporation. Compensation paid to a shareholder/employee of the corporation 28. Refund of prior year taxes for an accrual method taxpayer 34. Au Sable Corporation reported taxable income of $800,000 in 20X3 and paid federal income taxes of $272,000. The corporation’s current earnings and profits for 20X3 would be: A. Tar Heel Corporation had current and accumulated E&P of $500,000 at December 31 20X3.

For a stock redemption to be treated as an exchange under the “substantially disproportionate” rule, Tammy must reduce her stock ownership to below 48 percent. Brothers and sisters are considered “family” under the stock attribution rules that apply to stock redemptions. Under the attribution rules applying to stock redemptions, Diego is treated as owning 15 percent of Verde Corporation. The “family attribution” rules are automatically waived in a complete redemption of a shareholder’s stock. Battle Corporation redeems 20 percent of its stock for $100,000 in a stock redemption that is treated as an exchange by the shareholders. Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder? The distribution is a dividend to the extent of the corporation’s earnings and profits, then a return of capital, and finally gain from sale of stock. The distribution is a return of capital, then a dividend to the extent of the corporation’s earnings and profits, and finally gain from sale of stock. The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation’s earnings and profits. The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation’s earnings and profits or a return of capital, followed by gain from sale of stock. Which of the following statements best describes current earnings and profits? Current earnings and profits is another name for a corporation’s retained earnings on its balance sheet. Current earnings and profits is a precisely defined tax term in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is an ill-defined tax concept in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is a conceptual tax concept with no definition in the Internal Revenue Code. Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend? A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution. A distribution can never be a dividend if current earnings and profits are negative. A distribution will be a dividend if current earnings and profits for the year are positive, even if accumulated earnings and profits are negative. A distribution will never be a dividend if current earnings and profits for the year are negative, even if accumulated earnings and profits is positive. A calendar-year corporation has positive current E&P of $500 and accumulated negative E&P of $1,200. The distribution will not be a dividend because total earnings and profits is a negative $700. The distribution may be a dividend, depending on whether total earnings and profits at the date of the distribution is positive. The distribution will be a dividend because current earnings and profits are positive and exceed the distribution. A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in earnings and profits. A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. $500 of the distribution will be a dividend because total earnings and profits is $500. $0 of the distribution will be a dividend because current earnings and profits are negative. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. Which of these items is not an adjustment to taxable income or net loss to compute current E&P? Grand River Corporation reported taxable income of $500,000 in 20X3 and paid federal income taxes of $170,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 20X2 of $50,000. The corporation’s current earnings and profits for 20X3 would be: A. On December 31, the company made a distribution of land to its sole shareholder, William Roy.

Due to the $6,000 payment, Teresa recognizes a A) $6,000 long-term capital loss. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. 57) During 2007, Track Corporation distributes property to Cindy as part of a complete liquidation.

Gary's basis in the Key stock (a capital asset) surrendered is $120,000. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis.

,000. 0 of the distribution will be a dividend because total earnings and profits is 0.

Determine the beginning balance in Spartan’s accumulated E&P at the beginning of the next year. Included in the computation of taxable income were the following items: MACRS depreciation of 0,000. [LO5] EG Corporation redeemed 200 shares of stock from one of its shareholders in exchange for 0,000. Rusty’s income tax basis in the shares was per share.The redemption represented 20% of the corporation’s outstanding stock. Spartan had total E&P of ,000,000 at the time of the distribution. What is the amount and character (capital gain or dividend) of any income or gain recognized per share by Rusty as a result of the partial liquidation? Assuming Spartan made no other distributions to Rusty during the year, by what amount does Spartan reduce its total E&P as a result of the partial liquidation? [LO6] Wolverine Corporation made a distribution of 0,000 to Rich Rod, Inc. The distribution was in exchange for 50% of Rich Rod, Inc.’s stock in the company.ANSWER Distributions are treated as follows: (1) dividends to the extent of corporate E&P, (2) return of capital to the extent of the shareholder s stock basis, and (3) gain from the sale of stock.

of the distribution will be a dividend because current earnings and profits are negative. 0 of the distribution will be a dividend because accumulated earnings and profits is

Unrelated individuals own the remaining 40 percent. Azul Corporation owns 50 percent of Verde Corporation. Compensation paid to a shareholder/employee of the corporation 28. Refund of prior year taxes for an accrual method taxpayer 34. Au Sable Corporation reported taxable income of $800,000 in 20X3 and paid federal income taxes of $272,000. The corporation’s current earnings and profits for 20X3 would be: A. Tar Heel Corporation had current and accumulated E&P of $500,000 at December 31 20X3.For a stock redemption to be treated as an exchange under the “substantially disproportionate” rule, Tammy must reduce her stock ownership to below 48 percent. Brothers and sisters are considered “family” under the stock attribution rules that apply to stock redemptions. Under the attribution rules applying to stock redemptions, Diego is treated as owning 15 percent of Verde Corporation. The “family attribution” rules are automatically waived in a complete redemption of a shareholder’s stock. Battle Corporation redeems 20 percent of its stock for $100,000 in a stock redemption that is treated as an exchange by the shareholders. Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder? The distribution is a dividend to the extent of the corporation’s earnings and profits, then a return of capital, and finally gain from sale of stock. The distribution is a return of capital, then a dividend to the extent of the corporation’s earnings and profits, and finally gain from sale of stock. The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation’s earnings and profits. The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation’s earnings and profits or a return of capital, followed by gain from sale of stock. Which of the following statements best describes current earnings and profits? Current earnings and profits is another name for a corporation’s retained earnings on its balance sheet. Current earnings and profits is a precisely defined tax term in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is an ill-defined tax concept in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is a conceptual tax concept with no definition in the Internal Revenue Code. Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend? A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution. A distribution can never be a dividend if current earnings and profits are negative. A distribution will be a dividend if current earnings and profits for the year are positive, even if accumulated earnings and profits are negative. A distribution will never be a dividend if current earnings and profits for the year are negative, even if accumulated earnings and profits is positive. A calendar-year corporation has positive current E&P of $500 and accumulated negative E&P of $1,200. The distribution will not be a dividend because total earnings and profits is a negative $700. The distribution may be a dividend, depending on whether total earnings and profits at the date of the distribution is positive. The distribution will be a dividend because current earnings and profits are positive and exceed the distribution. A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in earnings and profits. A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. $500 of the distribution will be a dividend because total earnings and profits is $500. $0 of the distribution will be a dividend because current earnings and profits are negative. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. Which of these items is not an adjustment to taxable income or net loss to compute current E&P? Grand River Corporation reported taxable income of $500,000 in 20X3 and paid federal income taxes of $170,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 20X2 of $50,000. The corporation’s current earnings and profits for 20X3 would be: A. On December 31, the company made a distribution of land to its sole shareholder, William Roy.Due to the $6,000 payment, Teresa recognizes a A) $6,000 long-term capital loss. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. 57) During 2007, Track Corporation distributes property to Cindy as part of a complete liquidation.Gary's basis in the Key stock (a capital asset) surrendered is $120,000. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis.B) a loss of $2,000 last year and a loss of $2,000 this year. D) none of the above 54) Barbara owns 100 shares of Bond Corporation stock with a basis of $40,000.Barbara receives two liquidating distributions, including $16,000 paid last year and $20,000 paid in the current year. 55) Hope Corporation was liquidated four years ago.

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Unrelated individuals own the remaining 40 percent. Azul Corporation owns 50 percent of Verde Corporation. Compensation paid to a shareholder/employee of the corporation 28. Refund of prior year taxes for an accrual method taxpayer 34. Au Sable Corporation reported taxable income of $800,000 in 20X3 and paid federal income taxes of $272,000. The corporation’s current earnings and profits for 20X3 would be: A. Tar Heel Corporation had current and accumulated E&P of $500,000 at December 31 20X3.

For a stock redemption to be treated as an exchange under the “substantially disproportionate” rule, Tammy must reduce her stock ownership to below 48 percent. Brothers and sisters are considered “family” under the stock attribution rules that apply to stock redemptions. Under the attribution rules applying to stock redemptions, Diego is treated as owning 15 percent of Verde Corporation. The “family attribution” rules are automatically waived in a complete redemption of a shareholder’s stock. Battle Corporation redeems 20 percent of its stock for $100,000 in a stock redemption that is treated as an exchange by the shareholders. Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder? The distribution is a dividend to the extent of the corporation’s earnings and profits, then a return of capital, and finally gain from sale of stock. The distribution is a return of capital, then a dividend to the extent of the corporation’s earnings and profits, and finally gain from sale of stock. The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation’s earnings and profits. The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation’s earnings and profits or a return of capital, followed by gain from sale of stock. Which of the following statements best describes current earnings and profits? Current earnings and profits is another name for a corporation’s retained earnings on its balance sheet. Current earnings and profits is a precisely defined tax term in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is an ill-defined tax concept in the Internal Revenue Code and represents a corporation’s economic income. Current earnings and profits is a conceptual tax concept with no definition in the Internal Revenue Code. Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend? A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution. A distribution can never be a dividend if current earnings and profits are negative. A distribution will be a dividend if current earnings and profits for the year are positive, even if accumulated earnings and profits are negative. A distribution will never be a dividend if current earnings and profits for the year are negative, even if accumulated earnings and profits is positive. A calendar-year corporation has positive current E&P of $500 and accumulated negative E&P of $1,200. The distribution will not be a dividend because total earnings and profits is a negative $700. The distribution may be a dividend, depending on whether total earnings and profits at the date of the distribution is positive. The distribution will be a dividend because current earnings and profits are positive and exceed the distribution. A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in earnings and profits. A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. $500 of the distribution will be a dividend because total earnings and profits is $500. $0 of the distribution will be a dividend because current earnings and profits are negative. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. Which of these items is not an adjustment to taxable income or net loss to compute current E&P? Grand River Corporation reported taxable income of $500,000 in 20X3 and paid federal income taxes of $170,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 20X2 of $50,000. The corporation’s current earnings and profits for 20X3 would be: A. On December 31, the company made a distribution of land to its sole shareholder, William Roy.

Due to the $6,000 payment, Teresa recognizes a A) $6,000 long-term capital loss. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. 57) During 2007, Track Corporation distributes property to Cindy as part of a complete liquidation.

Gary's basis in the Key stock (a capital asset) surrendered is $120,000. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis.

,000. Up to 0 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution. Which of these items is not an adjustment to taxable income or net loss to compute current E&P? Grand River Corporation reported taxable income of 0,000 in 20X3 and paid federal income taxes of 0,000. Not included in the computation was a disallowed penalty of ,000, life insurance proceeds of 0,000, and an income tax refund from 20X2 of ,000. The corporation’s current earnings and profits for 20X3 would be: A. On December 31, the company made a distribution of land to its sole shareholder, William Roy.

Due to the ,000 payment, Teresa recognizes a A) ,000 long-term capital loss. In addition, Gary receives ,000 cash and land with a ,000 FMV and a ,000 adjusted basis. 57) During 2007, Track Corporation distributes property to Cindy as part of a complete liquidation.

Gary's basis in the Key stock (a capital asset) surrendered is 0,000. Property included in the distribution is ,000 in cash, land with a ,000 adjusted basis and a ,000 FMV, and a copyright without an ascertainable FMV and having a zero basis.

chapter c 6 liquidating distributions-74

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When a corporation makes a nonliquidating distribution to a shareholder, the shareholder must answer the following three questions: What is the amount of the distribution?

Evaluate whether each of these stock redemption transactions qualify for sale or exchange treatment. At the time of the distribution, the shares had a fair market value of 0 per share.

When a corporation makes a nonliquidating distribution to a shareholder, the shareholder must answer the following three questions: What is the amount of the distribution? Evaluate whether each of these stock redemption transactions qualify for sale or exchange treatment. At the time of the distribution, the shares had a fair market value of 0 per share.



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