CHAPTER19QUIZ - Corporations: Distributions Not in Complete...

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Corporations: Distributions Not in Complete Liquidation 19-1 CHAPTER 19 CORPORATIONS: DISTRIBUTIONS NOT IN COMPLETE LIQUIDATION EXAMINATION QUESTIONS ____1. During the year, Mulberry Corporation distributes equipment to its sole shareholder. If the fair market value of the equipment is less than its adjusted basis, Mulberry will recognize a loss at the date of distribution. ____2. A corporate shareholder that receives a constructive dividend can take a dividends received deduction on the distribution. ____3. If a distribution of stock rights is nontaxable and their fair market value is less than 15 percent of the value of the old stock, then a portion of the old stock basis must be assigned to the rights. ____4. A distribution of non-convertible preferred stock to a common shareholder is generally not taxable. ____5. The rules used to determine the taxability of stock dividends are the same as the rules that apply to distributions of stock rights. 6. As of January 1, 2006, Spruce Corporation has a deficit in accumulated E & P of $37,500. For tax year 2006, current E & P (all of which accrued ratably) is $20,000 (prior to any distribution). On July 1, 2005, Spruce Corporation distributes $25,000 to its sole, noncorporate shareholder. The amount of the distribution that is a dividend is: a. $0. b. $20,000. c. $25,000. d. $37,500. e. None of the above. 7. Balsa Corporation distributes land with a fair market value of $75,000 and an adjusted basis of $25,000. The land is subject to a liability of $30,000. What is the total effect of a. b. c. d. e. None of the above.
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19-2 2007 Comprehensive Edition 8. Willow Corporation has accumulated E & P of $175,000 on January 1, 2006. In 2006, Willow Corporation has current E & P of $75,000 (before any distribution). On December 31, 2006, Willow Corporation distributes $300,000 to its sole shareholder, a. $175,000. b.
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CHAPTER19QUIZ - Corporations: Distributions Not in Complete...

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