Business Structure

Question 1

How are gain and loss treated in absent of agreement in partnership?

Answer 1

Profits and loss are divide evenly among partners.

Note: When agreement silent, loss are treated similar to profit. No reverse rule that profits are treated like losses.

Question 2

Carr corporation declare 7% stock dividend on it common stock. The dividend:

a. Have no effect on E&P
b. Must be registered wt SEC
c. Includable in gross income of recipient in the tax year
d. Require a vote of carr’s stockholder

Answer 2

a. A stock dividend mean corp give the existing shareholders more stock. Corp is diluting the proportional ownership interest of existing shares. This has no effect on E&P of corporation

Question 3

Dissenting stockholder’s appraisal right generally apply to which corporation actions?

Answer 3

Short-form consolidating and Merger and Sale of assets.

Shareholder who are dissatisfied with the term of the merger, consolidation or sale of assets are permuted to compel the corp to buy their share at FMV. This is right of appraisal or dissenting right.