Entity/Owner Transactions_M7 Flashcards
What are the rule for currrent and accumulated earnings and profits (retained earnings)?
- The FMV of the property distribution is only a taxable dividend to the
extent of current and accumulated E&P. - Distributions come first proratically from E&P, secondly from Accumulated E&P in chronological order.
What are the Section 1244 Small Business Stock rules?
- Losses resulting from the sale, exchange or worthlessness of
Section 1244 qualifying stock (also called small business stock) are treated as ordinary losses up to $50,000 all other tax statuses, $100,000 MFJ in any tax year, using original basis as the value. - This loss is only available to original owners of the stock.
- If inherited the stock a capital loss in the year the stock was deemed entirely worthless is allowed using FMV as the basis.
How are non-liquidating distributions treated by corporations to shareholders?
- The property distributed by the corporartion is treated as if it were sold to the shareholder at its fair market value on the date of distribution.
- Gain is computed as the difference between the FMV and adjusted basis of the property.
How are liquidated corporation distribution of assets to shareholders treated?
FMV - basis + boot received = reconizable gain or loss.
**Treated like a sale in the market.
What is the basis of property received by a parent from a liquidated sub?
Subsidiaries carry over basis is property.
How is the redemption of stock treated?
- A stock redemption that is proportionate with respect to the
shareholder is treated as a dividend to the redeeming shareholder. - A complete termination of shareholders interest in the corporation, a complete liquidation of the corporation, a partial liquidation, is treated as an exchange of stock not as a dividend.
What is the difference in tax basis and regular basis in property or entity?
Tax basis is FMV used to determine gain (no boot is considered here). Regular basis is used to deterine value in entity (boot is considered here).
