Chapter 15 Questions - Income Tax II Name _Christian...

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Income Tax II Name __Christian Yimgnia_______ Chapter 15 Questions Explain and/or discuss the following based on reading the chapter and viewing the power points. Be thorough with your answers. You may take all the space you need. 1. What are earnings and profits? The tax status of cash or property distributions depends upon the distributing corporation’s earnings and profits. E & P is usually calculated annually and presents an overview of the corporation’s economic capacity to pay a dividend. Its main purpose is to measure the amount of distribution which represents a taxable dividend to the shareholder. 2. How are current earnings and profits determined? There are various adjustments made to the corporation’s taxable income to determine current E&P. These adjustments can generally be classified as: Items that are exempt from income but increase E&P like tax exempt municipal bond Interest Items that are deductible for taxable income but not from E&P such as capital loss carryovers Items that are deferred to later tax years but that increase E&P, like deferred gain on installment sale. 3. Describe the tax consequences to shareholders of property distributions. Give an example. Property distributions to stockholder are a little more complex than cash distributions.
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This note was uploaded on 02/11/2012 for the course INCOME TAX 4404 taught by Professor Bulie during the Spring '11 term at University of Minnesota Duluth.

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Chapter 15 Questions - Income Tax II Name _Christian...

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