Chapter 5 Quiz - is more than its adjusted basis White will...

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Quiz Chapter 5 True/False Indicate whether the statement is true or false. ____ 1. Distributions by a corporation to its shareholders are presumed to be a return of capital unless the parties can prove otherwise. ____ 2. Cash distributions received from a corporation with a deficit balance in accumulated E & P at the beginning of the year will not be taxed as dividend income. ____ 3. The terms “earnings and profits” and “retained earnings” are identical in meaning. ____ 4. 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 treated as a return of capital. ____ 5. Regardless of any deficit in accumulated E & P, distributions during the year are treated as dividends to the extent of current E & P. ____ 6. All dividends received by individual shareholders are subject to either a 15% or a 0% tax rate. ____ 7. During the year, White Corporation distributes land to its sole shareholder. If the fair market value of the land
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Unformatted text preview: is more than its adjusted basis, White will not recognize gain on the distribution. ____ 8. The amount of dividend income recognized by a shareholder from a property distribution is always reduced by the amount of liabilities assumed by the shareholder. ____ 9. A constructive dividend must satisfy the legal requirements of a dividend as set forth by applicable state law. Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 10. Jacqueline owns stock in Dove Corporation (basis of $40,000) as an investment. Dove distributes property (fair market value of $150,000; basis of $75,000) to her during the year. Dove has current E & P of $10,000 and accumulated E & P of $40,000 and makes no other distributions during the year. What is Jacqueline’s capital gain on the distribution? a. $0. b. $40,000. c. $60,000. d. $75,000. e. None of the above....
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