Chapter c 4 corporate nonliquidating distributions
86) In the current year, Red Corporation has $100,000 of current and accumulated E&P.
2) Corporations may always use retained earnings as a substitute for earnings and profits.a) How much income must Bert recognize when he receives the stock dividend?b) How much gain or loss must Bert recognize when he sells the ten shares he received as a stock dividend?6) Corporations recognize gains and losses on the distribution of property to shareholders if the property's fair market value differs from its basis.7) In a nontaxable distribution of stock rights, when the value of the rights is less than 15% of the value of the stock with respect to which the rights were distributed, the basis of the rights is zero unless the shareholder elects to allocate stock basis to the rights.The land is subject to a $5,000 liability which Dave assumes.
a) What are the amount and character of the distribution? c) When does his holding period for the property begin?
8) In a taxable distribution of stock, the recipient shareholder takes a basis equal to the FMV of the stock received.
9) A stock redemption is always treated as if the shareholder sold his stock to the corporation. 318 family attribution rules can be waived for purposes of the Sec.
3) When computing E & P, Section 179 property must be expensed ratably over a five-year period, starting with the month in which it is expensed for Sec. 4) A shareholder's basis in property distributed as a dividend is its fair market value.
5) 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.
b) What tax savings could have been obtained by Strong Corporation and Stedman if an agreement had been in effect that required Stedman to repay Strong Corporation any amounts determined by the IRS to be unreasonable?