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Question;460. 67;In the current year, Verdigris Corporation (with E & P of $250,000) made;the following property distributions to its shareholders (all corporations);Adjusted;Fair Market;Basis;Value;Black Corporation stock (held for investment);$75,000;$60,000;Non-LIFO inventory;40,000;55,000;Verdigris Corporation is not a member of a controlled group. As a result of the;distribution;a.;The shareholders have dividend income of $100,000.;b. The shareholders have dividend income;of $130,000.;c. Verdigris has a gain of $15,000 and a;loss of $15,000, both of which it must recognize.;d. Verdigris has no recognized gain or;loss.;e. None of the above.;461. 68;Swan Corporation makes a property distribution to its sole shareholder;Matthew. The property distributed is a cottage (fair market value of $135,000;basis of $110,000) that is subject to a $175,000 mortgage that Matthew assumes.;Before considering the consequences of the distribution, Swan?s current E;P is $25,000 and its accumulated E & P is 100,000. Swan makes no other;distributions during the current year. What is Swan?s taxable gain on the;distribution of the cottage?;a.;$0.;b. $15,000.;c. $25,000.;d. $65,000.;e. None of the above.;462. 69;Navy Corporation makes a property distribution to its sole shareholder, Troy.;The property distributed is a car (fair market value of $10,000, basis of;$15,000) that is subject to a $2,000 liability which Troy assumes. Navy makes;no other distributions during the current year. Navy has no accumulated E;P and $15,000 of current E & P from other sources during the year. What is;Navy?s E & P after taking into account the distribution of the car?;a.;$2,000.;b. $3,000.;c. $5,000.;d. $7,000.;e. None of the above.;463. 70;Pelican Corporation has E & P of $260,000. It distributes land with a fair;market value of $80,000 (adjusted basis of $30,000) to its sole shareholder;Bernard. The land is subject to a liability of $45,000 that Bernard assumes.;Bernard has a taxable dividend of;a.;$10,000.;b. $35,000.;c. $55,000.;d. $80,000.;e. None of the above.;464. 71;Which one of the following statements about property distributions is false?;a.;When the basis of distributed property is greater than its fair market value, a;deficit may be created in E & P.;b. When the basis of distributed;property is less than its fair market value, the distributing corporation;recognizes gain.;c. When the basis of distributed;property is greater than its fair market value, the distributing corporation;does not recognize loss.;d. The amount of a distribution received;by a shareholder is measured by using the property?s fair market value.;e. All of the above statements are true.;465. 72;Samantha owns stock in Pigeon Corporation (basis of $80,000) as an investment.;Pigeon distributes property (fair market value of $300,000, basis of $150,000);to her during the year. Pigeon has current E & P of $20,000 and accumulated;E & P of $80,000 and makes no other distributions during the year. What is;Samantha?s capital gain on the distribution?;a.;$0.;b. $80,000.;c. $120,000.;d. $150,000.;e. None of the above.;466. 73;Blue Corporation distributes property to its sole shareholder, Zeke. The;property has a fair market value of $450,000, an adjusted basis of $305,000;and is subject to a liability of $250,000. Current E & P is $550,000. With;respect to the distribution, Blue has a gain of;a.;$200,000 and Zeke has dividend income of $450,000.;b. $145,000 and Zeke?s basis is the;distributed property is $305,000.;c. $200,000 and Zeke?s basis in the;distributed property is $450,000.;d. $145,000 and Zeke has dividend income;of $200,000.;e. None of the above.;467. 74;Purple Corporation has accumulated E & P of $100,000 on January 1, 2011. In;2011, Purple has current E & P of $130,000 (before any distribution). On;December 31, 2011, the corporation distributes $250,000 to its sole;shareholder, Cindy (an individual). Purple Corporation?s E & P as of;January 1, 2012 is;a.;$0.;b. ($20,000).;c. $100,000.;d. $130,000.;e. None of the above.;468. 75;Rust Corporation has accumulated E & P of $30,000 on January 1, 2011. In;2011, Rust Corporation had an operating loss of $40,000. It distributed cash of;$20,000 to Andre, its sole shareholder, on December 31, 2011. Rust;Corporation?s balance in its E & P account as of January 1, 2012, is;a.;$30,000 deficit.;b. $10,000 deficit.;c. $0.;d. $30,000.;e. None of the above.;469. 76;Robin Corporation distributes furniture (basis of $40,000, fair market value of;$50,000) as a property dividend to its shareholders. The furniture is subject;to a liability of $55,000. Robin Corporation recognizes gain of;a.;$55,000.;b. $15,000.;c. $10,000.;d. $0.;e. None of the above.;470. 77;Ten years ago, Connie purchased 4,000 shares in Platinum Corporation for;$40,000. In the current year, Connie receives a nontaxable stock dividend of 40;shares of Platinum preferred. Values at the time of the dividend are: $8,000;for the preferred stock and $72,000 for the common. Based on this information;Connie?s basis is;a.;$40,000 in the common and $16,000 in the preferred.;b. $4,000 in the common and $136,000 in;the preferred.;c. $36,000 in the common and $4,000 in;the preferred.;d. $39,600 in the common and $400 in the;preferred.;e. None of the above.;471. 78;Which of the following statements regarding constructive dividends is not correct?;a.;Constructive dividends do not need to be formally declared or designated as a;dividend.;b. Constructive dividends need not be;paid pro rata to the shareholders.;c. Corporations that receive;constructive dividends may not use the dividends received deduction.;d. Constructive dividends are taxable as;dividends only to the extent of earnings and profits.;e. All of the above.;472. 79;Pink Corporation declares a nontaxable dividend payable in rights to subscribe;to common stock. Each right entitles the holder to purchase one share of stock;for $25. One right is issued for every two shares of stock owned. Jack owns 100;shares of stock in Pink, which he purchased three years ago for $3,000. At the;time of the distribution, the value of the stock is $45 per share and the value;of the rights is $2 per share. Jack receives 50 rights. He exercises 25 rights;and sells the remaining 25 rights three months later for $2.50 per right.;a.;Jack must allocate a part of the basis of his original stock in Pink to the;rights.;b. If Jack does not allocate a part of;the basis of his original stock to the rights, his basis in the new stock is;zero.;c. Sale of the rights produces ordinary;income to Jack of $62.50.;d. If Jack does not allocate a part of;the basis of his original stock to the rights, his basis in the new stock is;$625.;e. None of the above.;473. 80;Jose receives a nontaxable distribution of stock rights during the year from;Gold Corporation on January 30. Each right entitles the holder to purchase one;share of stock for $50. One right is issued for every share of stock owned.;Jose owns 100 shares of stock purchased two years ago for $5,000. At the date;of distribution, the rights are worth $1,000 (100 rights at $10 per right) and;Jose?s stock in Gold is worth $6,000 (or $60 per share). On December 1, Jose;sells all stock rights for $13 per right. How much gain does Jose recognize on;the sale?;a.;$1,300.;b. $586.;c. $500.;d. $0.;e. None of the above.

 

Paper#59219 | Written in 18-Jul-2015

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