Ch15TB - 757 Chapter 15 Corporate Nonliquidating...

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© 2009 CCH. All Rights Reserved. Chapter 15 757 Chapter 15 Corporate Nonliquidating Distributions TRUE-FALSE QUESTIONS—CHAPTER 15 A distribution is not a dividend if the accumulated de f 1. The distributor’s adjusted basis in a property dividend carries over to a corporate distributee. 2. 3. The amount of a cash dividend is independent of whether or not the shareholder is a corporation. 4. John Jergen’s stock basis is $3,000 and he has owned it for two years. If E&P is $4,000 and John receives a 5. distribution of $12,000, the result is a dividend of $4,000, a return of capital of $3,000, and a long-term capital gain of $5,000. Land with a basis of $2,000 and a value of $50,000 is distributed to an individual shareholder who has dividend 6. John and Paul Getty are brothers and own 50 percent each of the JP Corp. JP redeems all of John’s stock, but he does 7. not f le a 10-year agreement. John may have a dividend. A shareholder receives a tax-free preferred stock dividend on her common stock. Subsequently, she sells both her 8. common and preferred stock to her aunt. She will not have any dividend income. Olga Compers sells her stock in Astra, Inc. to Basta, Inc. If she is the sole shareholder of both corporations and Astra 9. When a tax-free right is received, the shareholder may be able to allocate basis to it from his stock, or it may simply 10. have a zero basis. A corporation is not required to recapture depreciation when it distributes appreciated Code Sec. 1245 property to its 11. shareholders. A corporation must recognize a gain if it distributes property with a liability in excess of adjusted basis. 12. 13. Code Sec. 302(b)(2) provides that a substantially proportionate redemption be treated as a sale or exchange. 14. If a distribution quali f es as a partial liquidation then all shareholders receive sale or exchange treatment on the 15. redemption. The proceeds under a Code Sec. 303 redemption are limited to the sum of all estate, inheritance, legacy, or succession 16. taxes imposed. A sale of Code Sec. 306 stock always results in ordinary income. 17. Unreasonable compensation is one type of constructive or disguised dividend. 18. In computing current E&P, the realized (but not recognized) gain on an involuntary conversion is added to taxable 19. income. 20.
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758 CCH Federal Taxation—Comprehensive Topics Chapter 15 © 2009 CCH. All Rights Reserved.
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Ch15TB - 757 Chapter 15 Corporate Nonliquidating...

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