Question 1

A distribution in excess of E & P is treated as capital gain by shareholders.

Accepted Answer

A) True 
 B)False

Question 2

When computing E & P, taxable income is not adjusted for § 179 expense.

Accepted Answer

A) True 
 B)False

Question 3

Nondeductible meal expense must be subtracted from taxable income to determine current E & P.

Accepted Answer

A) True 
 B)False

Question 4

Renee, the sole shareholder of Indigo Corporation, sold her stock to Chad on July 1 for $180,000.Renee's stock basis at the beginning of the year was $120,000.Indigo made a $60,000 cash distribution to Renee immediately before the sale, while Chad received a $120,000 cash distribution from Indigo on November 1.As of the beginning of the current year, Indigo had $26,000 in accumulated E & P, while current E & P before distributions)  was $90,000.Which of the following statements is correct?

Accepted Answer

A)  Renee recognizes a $60,000 gain on the sale of the stock.
B)  Renee recognizes a $64,000 gain on the sale of the stock.
C)  Chad recognizes dividend income of $120,000.
D)  Chad recognizes dividend income of $30,000.
E)  None of the above.F) C) and E)
G) B) and E)

Question 5

Tangelo Corporation has an August 31 year-end.Tangelo had $50,000 in accumulated E & P at the beginning of its 2019 fiscal year September 1, 2018)  and during the year, it incurred a $75,000 operating loss.It also distributed $65,000 to its sole shareholder, Cass, on November 30, 2018.If Cass is a calendar year taxpayer, how should she treat the distribution when she files her 2018 income tax return assuming the return is filed by April 15, 2019) ?

Accepted Answer

A)  $65,000 of dividend income.
B)  $60,000 of dividend income and $5,000 recovery of capital.
C)  $50,000 of dividend income and $15,000 recovery of capital.
D)  The distribution has no effect on Cass in the current year.
E)  None of the above.F) All of the above
G) C) and D)

Exam 13: Corporations: Earnings and Profits and Distributions

A distribution in excess of E & P is treated as capital gain by shareholders.

Correct Answer
verified

Nondeductible meal expense must be subtracted from taxable income to determine current E & P.

Correct Answer
verified

Correct Answer
verified

When computing E & P, taxable income is not adjusted for § 179 expense.

Correct Answer
verified

Correct Answer
verified

Exam 13: Corporations: Earnings and Profits and Distributions

A distribution in excess of E & P is treated as capital gain by shareholders.

Correct AnswerverifiedShow Answer

Nondeductible meal expense must be subtracted from taxable income to determine current E & P.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When computing E & P, taxable income is not adjusted for § 179 expense.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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