FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 13: Corporations: Earnings and Profits and Distributions

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

True/False

Review LaterAdd Note

Review Later

Constructive dividends do not need to satisfy the legal requirements for a dividend as set forth by applicable state law.

A) True
B) False

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

Robin Corporation, a calendar year taxpayer, has a deficit in current E & P of $200,000 and a $580,000 positive balance in accumulated E & P.If Robin determines that a $700,000 distribution to its shareholders is appropriate at some point during the year, what is the maximum amount of the distribution that could potentially be treated as a dividend?

A) $0
B) $380,000
C) $480,000
D) $580,000
E) None of these.

F) A) and B)
G) None of the above

Correct Answer

verified

Show Answer

Question 33

True/False

Review LaterAdd Note

A distribution in excess of E & P is treated as capital gain by shareholders.

On January 1, Gold Corporation (a calendar year taxpayer) has E & P of $30,000 and generates no additional E & P during the year.On March 31, the corporation distributes $40,000 to its sole shareholder, Ava (basis in stock of $8,000).Determine the effect of the distribution on Ava's taxable income and stock basis.

Matching Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2019. a. Increase b. Decrease c. No effect -Gain realized but not recognized in a like-kind exchange transaction in 2019.

Matching Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2019. a. Increase b. Decrease c. No effect -Additional first-year (bonus) depreciation deduction claimed in 2019.

Gold Corporation has accumulated E & P of $2 million as of January 1 of the current year.During the year, it expects to have earnings from operations of $1,680,000 and to distribute $900,000 in cash to shareholders.Gold Corporation also expects to sell an asset for a loss of $2 million.Thus, it anticipates incurring a deficit of $320,000 for the year.What can Gold do to minimize the amount of dividend income to its shareholders?

At the beginning of the current year, both Doug and Amelia each own 50% of Amaryllis Corporation (a calendar year taxpayer) .In July, Doug sold his stock to Kevin for $140,000.At the beginning of the year, Amaryllis Corporation had accumulated E & P of $240,000 and its current E & P is $280,000 (prior to any distributions) .Amaryllis distributed $300,000 on February 15 ($150,000 to Doug and $150,000 to Amelia) and distributed another $300,000 on November 1 ($150,000 to Kevin and $150,000 to Amelia) .Kevin has dividend income of:

Provide a brief outline on computing current E & P.

The Code treats corporate distributions that are a return of a shareholder's investment as sales or exchanges and corporate distributions that are a return from a shareholder's investment as dividends.

To determine E & P, some (but not all) previously excluded income items are added back to taxable income.

At the beginning of the current year, both Paul and John own 50% of Apple Corporation.In July, Paul sold his stock to Sarah for $110,000.At the beginning of the year, Apple Corporation had accumulated E & P of $200,000 and its current E & P is $250,000 (prior to any distributions).Apple distributed $260,000 on March 1 ($130,000 to Paul and $130,000 to John) and distributed another $260,000 on October 1 ($130,000 to Sarah and $130,000 to John).What are the tax implications of the $130,000 distribution to Sarah?

A deficit in current E & P is treated as occurring ratably during the year unless the taxpayer can show otherwise.

Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2019. a. Increase b. Decrease c. No effect -Charitable contribution carryforward deducted in the current year.

Maria owns 75% and Christopher owns 25% of Cockatoo Corporation, a calendar year taxpayer.Cockatoo makes a $600,000 distribution to Maria on April 1 and a $200,000 distribution to Christopher on May 1.Cockatoo's current E & P is $120,000 and its accumulated E & P is $500,000.What are the tax implications of the distributions to Maria and Christopher?

Scarlet Corporation is an accrual basis, calendar year corporation.Scarlet distributes inventory (basis of $20,000; fair market value of $40,000) to Frank, its shareholder.Assuming that Scarlet has $500,000 of current E & P, what is the impact of the distribution on Scarlet Corporation and on Frank?

Briefly discuss the rules related to distributions of noncash property.

Nondeductible meal expense must be subtracted from taxable income to determine current E & P.

A shareholder's basis in property acquired in a stock redemption is the property's fair market value as of the date of redemption.

Ashley, the sole shareholder of Hawk Corporation, has a stock basis of $200,000 at the beginning of the year.On July 1, she sells all of her stock to Matt for $1 million.On January 1, Hawk has accumulated E & P of $90,000 and during the year, current E & P of $160,000.Hawk makes the following cash distributions: $270,000 to Ashley on March 31 and $90,000 to Matt on December 1.How are the distributions to Ashley and Matt taxed? What is Ashley's recognized gain on the sale to Matt?