chapter-06-homework-answers - ID A Chapter 6 Answer Section TRUE\/FALSE 1 ANS F Distributions that are returns of the shareholders investment are treated

chapter-06-homework-answers - ID A Chapter 6 Answer Section...

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ID: A 1 Chapter 6 Answer Section TRUE/FALSE 1. ANS: F Distributions that are returns of the shareholder’s investment are treated as a sale or exchange of the investment. Distributions that are returns from the shareholder’s investment are dividend distributions. PTS: 1 DIF: 1 REF: p. 6-2 | p. 6-3 OBJ: 1 NAT: AICPA FN-Reporting | AACSB Analytic MSC: 2 min 2. ANS: F Nonqualified stock redemptions result in dividend treatment (assuming adequate E & P), but qualifying stock redemptions receive sale or exchange treatment. PTS: 1 DIF: 1 REF: p. 6-3 OBJ: 1 NAT: AICPA FN-Reporting | AACSB Analytic MSC: 2 min 3. ANS: F The dividends received deduction is available only to corporate shareholders. Noncorporate shareholders typically prefer qualifying stock redemption treatment. PTS: 1 DIF: 1 REF: p. 6-3 | p. 6-4 OBJ: 1 NAT: AICPA FN-Reporting | AACSB Analytic MSC: 2 min 4. ANS: T The basis of property received in any stock redemption, qualifying or not, is the property’s fair market value on the date of the distribution. PTS: 1 DIF: 1 REF: p. 6-4 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 5. ANS: T PTS: 1 DIF: 1 REF: p. 6-4 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 6. ANS: F Neither the terminology of the redemption agreement nor state law controls the tax treatment of a stock redemption. Instead, the Code determines the tax treatment of stock redemptions. PTS: 1 DIF: 1 REF: p. 6-4 OBJ: 1 NAT: AICPA FN-Reporting | AACSB Analytic MSC: 2 min 7. ANS: T PTS: 1 DIF: 1 REF: Exhibit 6.1 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min
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