V2-SM_ch 05

V2-SM_ch 05 - CHAPTER 5 CORPORATIONS: EARNINGS...

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Unformatted text preview: CHAPTER 5 CORPORATIONS: EARNINGS & PROFITS AND DIVIDEND DISTRIBUTIONS SOLUTIONS TO PROBLEM MATERIALS Status: Q/P Question/ Learning Present in Prior Problem Objective Topic Edition Edition *1 LO 1 Taxation of corporate distributions Unchanged 1 2 LO 2 Definition of earnings and profits Unchanged 2 3 LO 2 Effect of selected transactions in adjusting Modified 3 taxable income (for determining E & P) 4 LO 2 Comparison of accounting methods under Unchanged 4 E & P and income tax 5 LO 5 Effect of selected situations in adding to or Unchanged 5 generating a deficit in E & P 6 LO 3 Effect of distribution, taxable dividend Unchanged 6 or return of capital, in selected situations 7 LO 3 Planning corporate distributions: beginning Unchanged 7 or end of tax year 8 LO 3 Rationale for reduced tax rate on dividends Unchanged 8 *9 LO 1, 2, 3, Factors affecting tax treatment of Unchanged 9 4, 5 distribution 10 LO 4 Requirements for qualified dividend tax rates Unchanged 10 11 LO 5 Purpose of property dividend versus cash Unchanged 11 dividend 12 LO 5 Property distribution: choice of property Unchanged 12 13 LO 5 Effect of property dividend on distributing Unchanged 13 corporation 14 LO 5 Impact of property distributions on New corporation 15 LO 6 Necessity of dividend distribution to meet Unchanged 15 state legal requirements in determining tax treatment *16 LO 6 Reasonable compensation and constructive Unchanged 16 dividends 17 LO 6 Selected factors in determining Unchanged 17 reasonableness of compensation Instructor : For difficulty, timing, and assessment information about each item, see p. 5-4. 5-1 5-2 2011 Corporations Volume/Solutions Manual Status: Q/P Question/ Learning Present in Prior Problem Objective Topic Edition Edition 18 LO 4, 8 Choice between dividend and deductible Modified 18 payment 19 LO 6, 8 Unreasonable compensation Unchanged 19 20 LO 6, 8 Unreasonable compensation; ways to Unchanged 20 draw funds from corporation 21 LO 7 Election to receive common or preferred Unchanged 21 stock dividend 22 LO 7 Rationale underlying tax treatment of stock Unchanged 22 distributions 23 LO 7 Explain tax effects of nontaxable stock Unchanged 23 rights; taxable stock rights 24 LO 1, 4 Amount of dividend income Modified 24 25 LO 2 Amount of taxable income; balance in E & P Modified 25 26 LO 1, 2, 3 Deficit in E & P followed by sale on Unchanged 26 installment method; taxation of dividend distribution *27 LO 2 Compute E & P Unchanged 27 *28 LO 2 Effect of specified transactions on taxable Unchanged 28 income; on E & P *29 LO 2 Effect of income tax refund on E & P Modified 29 30 LO 1, 3 Amount of dividend income; deficit in Unchanged 30 current E & P with positive balance in accumulated E & P 31 LO 1, 3 Dividend distribution; effect on E & P Unchanged 31 32 LO 1, 3 Dividend distribution; effect on E & P Unchanged 32 33 LO 1, 3 Dividend distribution; effect on E & P Modified 33 *34 LO 1, 3 Cash distributions; determination of taxable Unchanged 34 amount 35 LO 1, 3...
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V2-SM_ch 05 - CHAPTER 5 CORPORATIONS: EARNINGS...

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