been exhausted, any remaining distribution is considered to be paid from accumulated E&P. True. 24. False. Any distribution that is not from either current or accumulated E&P is not a dividend but is instead 25. considered a return of capital, which will be tax free to the shareholders to the extent of their respective adjusted bases in the stock. True. 26. True. 27. True. 28. True. 29. True. 30. True. 31. True. 32. True. 33. False. The rules regarding the calculation of E&P allow Section 179 property to be expensed ratably over 34. fi ve years. True. 35. False. When computing gain for E&P, adjusted basis using E&P depreciation deductions must be used. 36. False. Gains and losses that are merely postponed do not affect the calculation of E&P until the year they 37. are recognized. False. When a C corporation distributes appreciated property, its E&P are increased by the gain it 38. recognizes on such distribution. False. When a corporation makes a nontaxable distribution of its own stock, the corporation does not have 39. to reduce its E&P.
681 Testbank © 2010 CCH. All Rights Reserved. Chapter 16 True. 40. True. 41. True. 42. False. Each partner decides whether to deduct or take a tax credit for foreign taxes paid during the year. 43. False. The only time a partner is taxed on a distribution from the partnership is when the amount of cash 44. distributed exceeds the partner’s basis in the partnership interest. False. The partner’s capital account keeps track of what the partner is entitled to receive upon dissolution 45. of the partnership. True. 46. False. The principal partners rule requires that the partnership adopt the tax year used by all of its principal 47. partners. True. 48. True. 49. False. The partners include the amounts reported on their respective Schedule K-1s on their income tax 50. returns for the year that includes the last day of the partnership’s tax year, regardless of whether any or all of the income was distributed to them during the year. False. When a partnership makes a charitable contribution, it determines the amount that is deductible 51. under the tax laws; however, since the tax laws apply different charitable contribution limits to corporate and individual taxpayers, it would be inappropriate to deduct charitable contributions against partnership gross income. True. 52. False. The tax laws require that certain partnership items be allocated to the partners in a particular manner, 53. despite the allocations that may be speci fi ed in the partnership agreement. True. 54. True. 55. True. 56. True. 57. True. 58. False. The tax laws typically require that the gain or loss be allocated to the contributing partner to the 59. extent of the partner’s realized (but not recognized) gain or loss when the property was contributed to the partnership. False. The “taint” on inventory contributed to a partnership lasts for fi ve years after it is contributed. After 60.
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