Gloria Deal's Advanced Tax Corporation Unit 4 Discussion

Gloria Deal's Advanced Tax Corporation Unit 4 Discussion -...

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1. What is meant by the term "arms length" and how do you see it as important in tax planning? Professor and Class Main Post, After reading this weeks material I learned that arms length is a transaction where the buyer and seller are independent of each other and have no kind of relationship between the two. However the concept is aimed at ensuring both of the parties are operating with their own interests and feeling with no pressure from a third party. Without these rules, one could transfer any kind of ownership and side step the unfavorable tax laws as well as any negative tax consequences. Reference: Anderson, Pope, and Kramer (2011), Prentice Hall’s Federal Taxation 2011: Corporations, Partnership, Estates & Trusts, Pearson Education, Inc. 2. In a stock redemption would corporate and noncorporate shareholders have the same preference
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Unformatted text preview: for tax treatment? Explain your response. After reading this weeks materi as l I learned that for the Corporate shareholders their stock redemption is treated as dividends; while the noncorporate shareholders stock redemption are treated as a sale. They do not have the same tax preferences, and the stock redemption that have been treated as a sale will have capital gains that may be offset by capital losses and the basis of the shares redeemed reduces the amount of income recognized. However the stock redemption treated as dividend basis of the shares redeemed will not reduce the dividend amount. Reference: Anderson, Pope, and Kramer (2011), Prentice Halls Federal Taxation 2011: Corporations, Partnership, Estates & Trusts, Pearson Education, Inc...
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This note was uploaded on 10/04/2011 for the course ACCOUNTING AC 430 taught by Professor Johndavis during the Spring '09 term at Kaplan University.

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