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Question;394.;Distributions by a corporation to its shareholders are presumed to be a return;of capital unless the parties can prove otherwise.;a.;True;b. False;395.;A distribution from a corporation will be taxable to the recipient shareholders;only to the extent of the corporation?s E & P.;a.;True;b. False;396. 3;Distributions that are not dividends are a return of capital and decrease the;shareholder?s basis. Once basis is reduced to zero, any excess is taxed as a;capital gain.;a.;True;b. False;397. 4;Cash distributions received from a corporation with a positive balance in;accumulated E & P at the beginning of the year will be taxed as dividend;income.;a.;True;b. False;398. 5;A distribution in excess of E & P is treated as capital gain by shareholders.;a.;True;b. False;399. 6;The terms ?earnings and profits? and ?retained earnings? are identical in;meaning.;a.;True;b. False;400. 7;To determine E & P, some (but not all) previously excluded income items are;added back to taxable income.;a.;True;b. False;401. 8;When computing E & P, taxable income is not adjusted for additional;first-year depreciation.;a.;True;b. False;402. 9;When computing current E & P, taxable income is not adjusted for the;deferred gain in a ? 1031 like-kind exchange.;a.;True;b. False;403. CHAPTER;5?10;An increase in the LIFO recapture amount must be added to taxable income to;determine E & P.;a.;True;b. False;404. CHAPTER;5?11;Use of MACRS cost recovery when computing taxable income does not require an E;P adjustment.;a.;True;b. False;405. CHAPTER;5?12;When a corporation makes an installment sale, for E & P purposes the;realized gain is recognized in the year of sale.;a.;True;b. False;406. CHAPTER;5?13;A corporation borrows money to purchase State of Texas bonds. The interest on;the loan has no impact on either taxable income or current E & P.;a.;True;b. False;407. CHAPTER;5?14;Federal income tax paid in the current year must be subtracted from taxable;income to determine E & P.;a.;True;b. False;408. CHAPTER;5?15;When computing E & P, an adjustment to taxable income is necessary for any;domestic production activities deduction.;a.;True;b. False;409. CHAPTER;5?16;Nondeductible meal and entertainment expenses must be subtracted from taxable;income to determine current E & P.;a.;True;b. False;410. CHAPTER;5?17;The dividends received deduction is added back to taxable income to determine E;P.;a.;True;b. False;411. CHAPTER;5?18;A realized gain from an involuntary conversion under ? 1033 that is not;recognized for income tax purposes has no effect on E & P.;a.;True;b. False;412. CHAPTER;5?19;In the current year, Pink Corporation has a ? 179 expense of $80,000. As a;result, next year, taxable income;must be decreased by $16,000 to determine current E & P.;a.;True;b. False;413. CHAPTER;5?20;Any loss in current E & P must be treated as occurring ratably during the;year.;a.;True;b. False;414. CHAPTER;5?21;When current E & P has a deficit and accumulated E & P is positive, the;two accounts are netted at the date of the distribution. If a positive balance;results, the distribution is a dividend to the extent of the balance.;a.;True;b. False;415. CHAPTER;5?22;When current E & P is positive and accumulated E & P has a deficit;balance, the two accounts are netted for dividend determination purposes.;a.;True;b. False;416. CHAPTER;5?23;Regardless of any deficit in current E & P, distributions during the year;are taxed as dividends to the extent of accumulated E & P.;a.;True;b. False;417. CHAPTER;5?24;Corporate distributions are presumed to be paid out of E & P and are;treated as dividends unless the parties to the transaction can show otherwise.;a.;True;b. False;418. CHAPTER;5?25;Dividends paid to shareholders who hold both long and short positions do not;qualify for the reduced tax rate available to individuals in certain years.;a.;True;b. False;419. CHAPTER;5?26;Dividends taxed as ordinary income are considered investment income for;purposes of the investment interest expense limitation.;a.;True;b. False;420. CHAPTER;5?27;Certain dividends from foreign corporations can be qualified dividends for;purposes of the 15% rate available to individuals.;a.;True;b. False;421. CHAPTER;5?28;During the year, Blue Corporation distributes land to its sole shareholder. If;the fair market value of the land is less than its adjusted basis, Blue will;recognize a loss on the distribution.;a.;True;b. False;422. CHAPTER;5?29;In certain circumstances, the amount of dividend income recognized by a;shareholder from a property distribution is not reduced by the amount of;liability assumed by a shareholder.;a.;True;b. False;423. CHAPTER;5?30;Property distributed by a corporation as a dividend is subject to a liability;in excess of its basis. For purposes of determining gain on the distribution;the basis of the property is treated as being not less than the amount of;liability.;a.;True;b. False;424. CHAPTER;5?31;A corporation that distributes a property dividend must reduce its E & P by;the adjusted basis of the property less any liability on the property.;a.;True;b. False;425. CHAPTER;5?32;Under certain circumstances, a distribution can generate (or add to) a deficit;in E & P.;a.;True;b. False;426. CHAPTER;5?33;Constructive dividends do not need to satisfy the legal requirements for a;dividend as set forth by applicable state law.;a.;True;b. False;427. CHAPTER;5?34;Constructive dividends have no effect on a distributing corporation?s E;P.;a.;True;b. False;428. CHAPTER;5?35;If a stock dividend is taxable, the shareholder?s basis in the newly received;shares is equal to the fair market value of the shares received in the;distribution.;a.;True;b. False;429. CHAPTER;5?36;A corporate shareholder that receives a constructive dividend cannot apply a;dividends received deduction to the distribution.;a.;True;b. False;430. CHAPTER;5?37;If a distribution of stock rights is taxable and their fair market value is;less than 15 percent of the value of the old stock, then either a zero basis or;a portion of the old stock basis may be assigned to the rights, at the;shareholder?s option.;a.;True;b. False;431. CHAPTER;5?38;A pro rata distribution of nonconvertible preferred stock to common;shareholders is not generally taxable.;a.;True;b. False;432. CHAPTER;5?39;The rules used to determine the taxability of stock dividends also apply to;distributions of stock rights.;a.;True;b. False;433. 394.;Distributions by a corporation to its shareholders are presumed to be a return;of capital unless the parties can prove otherwise.;a.;True;b. False


Paper#59273 | Written in 18-Jul-2015

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