ch19 - 1. Distributions by a corporation to its...

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Unformatted text preview: 1. Distributions by a corporation to its shareholders are presumed to be a return of capital unless the parties can prove otherwise. a. True *b. False 2. A distribution from a corporation will be taxable to the recipient shareholders only to the extent of the corporations E & P. a. True *b. False 3. Distributions that are not dividends are a return of capital and decrease the shareholders basis. Once basis is reduced to zero, any excess is taxed as a capital gain. *a. True b. False 4. Cash distributions received from a corporation with a positive balance in accumulated E & P at the beginning of the year will be taxed as dividend income. a. True *b. False 5. A distribution in excess of E & P is treated as capital gain by shareholders. a. True *b. False 6. The terms earnings and profits and retained earnings are identical in meaning. a. True *b. False 7. To determine E & P, some (but not all) previously excluded income items are added back to taxable income. a. True *b. False 8. When computing E & P, taxable income is not adjusted for additional first-year depreciation. a. True *b. False 9. When computing current E & P, taxable income is not adjusted for the deferred gain in a 1031 like-kind exchange. *a. True b. False 10. An increase in the LIFO recapture amount must be added to taxable income to determine E & P. *a. True b. False 11. Use of MACRS cost recovery when computing taxable income does not require an E & P adjustment. a. True *b. False 12. When a corporation makes an installment sale, for E & P purposes the realized gain is recognized in the year of sale. *a. True b. False 13. A corporation borrows money to purchase State of Texas bonds. The interest on the loan has no impact on either taxable income or current E & P. a. True *b. False 14. Federal income tax paid in the current year must be subtracted from taxable income to determine E & P. *a. True b. False 15. When computing E & P, an adjustment to taxable income is necessary for any domestic production activities deduction. *a. True b. False 16. Nondeductible meal and entertainment expenses must be subtracted from taxable income to determine current E & P. *a. True b. False 17. The dividends received deduction is added back to taxable income to determine E & P. *a. True b. False 18. A realized gain from an involuntary conversion under 1033 that is not recognized for income tax purposes has no effect on E & P. *a. True b. False 19. In the current year, Pink Corporation has a 179 expense of $80,000. As a result, next year , taxable income must be decreased by $16,000 to determine current E & P. *a. True b. False 20. Any loss in current E & P must be treated as occurring ratably during the year....
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ch19 - 1. Distributions by a corporation to its...

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