chapter 19 - Chapter 19 Corporations: Distributions Not in...

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Chapter 19 Corporations: Distributions Not in Complete Liquidation Accumulated earnings and profits. Net undistributed tax-basis earnings of a corporation aggregated from March 1, 1913, to the end of the prior tax year. Used to determine the amount of dividend income associated with a distribution to shareholders. § 316 and Reg. § 1.316–2. Attribution. Under certain circumstances, the tax law applies attribution (constructive ownership) rules to assign to one taxpayer the ownership interest of another taxpayer. If, for example, the stock of Gold Corporation is held 60 percent by Marsha and 40 percent by Sidney, Marsha may be deemed to own 100 percent of Gold Corporation if Marsha and Sidney are mother and son. In that case, the stock owned by Sidney is attributed to Marsha. Stated differently, Marsha has a 60 percent direct and a 40 percent indirect interest in Gold Corporation. It can also be said that Marsha is the constructive owner of Sidney’s interest. Complete termination redemption. Sale or exchange treatment is available relative to this type of redemption. The shareholder must retire all of his or her outstanding shares in the corporation (ignoring family attribution rules), and cannot hold an interest, other than that of a creditor, for the 10 years following the redemption. § 302(b)(3). Constructive dividend. A taxable benefit derived by a shareholder from his or her corporation that is not actually called a dividend. Examples include unreasonable compensation, excessive rent payments, bargain purchases of corporate property, and shareholder use of corporate property. Constructive dividends generally
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This note was uploaded on 11/28/2010 for the course BU 5520 taught by Professor D during the Spring '10 term at SUNY Old Westbury.

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chapter 19 - Chapter 19 Corporations: Distributions Not in...

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