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Exam 4: Corporate Nonliquidating Distributions

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Question 1

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What must be reported to the IRS by corporations when nondividend distributions are made to its shareholders?

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The basic purpose of Form 5452,Corporate...

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Question 2

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Which of the following statements is not true about redemptions?

A) Redemptions of Sec.306 stock are generally treated as dividends to the shareholder.
B) A sale of stock from one controlled corporation to another controlled corporation is treated as a redemption.
C) Redemptions to pay death taxes are treated as dividends to the shareholder.
D) A distribution in redemption of stock is generally a dividend.

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Question 3

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Poppy Corporation was formed three years ago.Poppy's E&P history is as follows: Poppy Corporation's accumulated E&P on January 1 will be

Current E&P does not include

Identify which of the following statements is true.

Alice owns 56% of Daisy Corporation's stock and 50% of May Corporation's stock.Alice sells one-half of her interest in May Corporation to Daisy Corporation for $30,000.The E&P balances of Daisy and May are $25,000 and $35,000,respectively.Alice's basis in her Daisy stock is $40,000 and her basis in the May stock is $38,000.What are the tax consequences of the transaction?

Identify which of the following statements is false.

Gould Corporation distributes land (a capital asset)worth $90,000 to Gerry,a shareholder.The land has a $30,000 basis to Gould.What is the amount and character of the gain or loss recognized by Gould?

Peach Corporation was formed four years ago.Its current E&P (or E&P deficit)and distributions for the most recent four years are as follows: What is Peach's accumulated E&P at the beginning of 2006,2007,2008,and 2009?

When appreciated property is distributed in a nonliquidating distribution,the net effect on the distributing corporation's E&P is that it is reduced by the FMV of the property distributed and increased by the gain (net of federal income taxes)recognized due to the property distribution.

Which of the following statements best describes a bootstrap acquisition?

Maury Corporation has 200 shares of stock outstanding as follows: How many shares is Amy deemed to own under the Sec.318 attribution rules?

Bruce receives 20 stock rights in a nontaxable distribution.The stock rights have an FMV of $5,000.The common stock with respect to which the rights are issued has a basis of $4,000 and an FMV of $120,000.Bruce allows the stock rights to lapse.He can deduct a loss of

Green Corporation is a calendar-year taxpayer.All of the stock is owned by Evan.His basis for the stock is $35,000.On March 1 (of a non-leap year),Green Corporation distributes $120,000 to Evan.Determine the tax consequences of the cash distribution to Evan in each of the following independent situations:

Boris owns 60 of the 100 shares outstanding of Bread Corporation stock and 80 of the 100 shares of Butter Corporation stock.His basis in the Bread shares is $10,000 and his basis in his Butter shares is $5,000.Boris sells 30 of his Bread Corporation shares to Butter Corporation for $25,000.Bread Corporation has E&P of $20,000 and Butter Corporation has E&P of $40,000.In applying the substantially disproportionate test to determine if this is a sale or a dividend,Boris is treated as owning how many shares of Bread after the sale?

Maple Corporation distributes land to a noncorporate shareholder.Explain how the following items are computed: a)the amount of the distribution. b)the amount of the dividend. c)the basis of the land to the shareholder. d)the start of the holding period for the land. How would your answers change if the distribution was made to a corporate shareholder?

Why are stock dividends generally nontaxable? Under what circumstances are stock dividends taxable?

John,the sole shareholder of Photo Specialty Corporation has had an exceptional year.He is considering issuing himself a large bonus in lieu of a dividend.You are concerned about unreasonable compensation.What issues must be considered?

Good Times Corporation has a $60,000 accumulated E&P balance at the beginning of the year and incurs a $100,000 deficit during the year.Because of its poor operating performance,Good Times pays only three of its usual $10,000 quarterly dividend payments to its sole shareholder: those ordinarily paid March 31,June 30,and September 30.How are the March 31,June 30,and September 30 payments of $10,000 treated?

Corporate distributions that exceed earnings and profits are always capital gains.