Exam Review SU#9 Flashcards
E&P is increased by
a distribution of appreciated property
E&P is decreased by
the FMV of property net of any liability assumed by a shareholder
Gain realized on the transfer of property
Transactions that qualify under section 351 for non-recognition of mortgages property to a controlled corp. does not require gain recognition unless the liabilities transferred or assumed are greater than the basis of all property transferred
A shareholder of an S corporation must recognize gain of
A liability assumed by an S corporation from the sale or exchange of an asset the gain recognized is only to the extent it exceeds the AB of the property contributed by the shareholder
Qualified Reorganization
A mere change in identity, form, or place of organization of one corporation does not qualify as a reorganization
Securities in corporations not parties to a reorganization are
Boot. A corporation must be a party to a reorganization in order for its property, stock, or securities, to be exchanged tax-free.
Under a plan of complete Liquidation
Section 336(a) provides that a corporation should treat a complete liquidation as a sale using the FMV. However, Sec. 336(b) requires the FMV used should be less than any liability accepted by the distribute. Therefore, the new FMV would be the greater of the liability or the FMV.
Any distribution of money or property made by a corporation to its shareholders with respect to their stock out of the corporations AE&P is treated as a
Taxable dividend. The current AE&P determine the level of taxability & the remaining will reduce AB in shareholder stock.
Section 351 states that no gain or loss is recognized when property is transferred to a corporation in exchange for the corps stock if the person or persons transferring property are in control of the corp. immediately after the transfer
Control is defined as 80% ownership of corp. voting & nonvoting stock
A corporation recognizes any losses realized on liquidating distributions
Applicable distributions include those assets acquired within 5 years by a contribution to capital or a section 351 exchange. Permanent disallowance of the loss results. Since the shareholder owns 90% he is a related party & therefore, this results in a permanent disallowance of the loss.
A distribution of taxable stock rights or dividends are treated the same as
Any other property distribution, & holding period begins on the day after the distribution date.
The solely-for-stock requirement of section 351 causes the entire transaction to be
non-taxable if any non-stock property is received by the shareholder. To the extent the shareholder receives the corporations stock in exchange for property, non-recognition is required even if the shareholder receives some boot in the exchange
A controlled group shareholders basis in the corporations stock is
the adjusted basis in contributed property adjusted for the boot received and the gain recognized
A corporations loss on a distribution is treated as
No loss realized on ordinary distribution may be recognized. The shareholder takes the FMV basis in the property.
Type A reorganization is
a statutory merger or consolidation
Type B reorganization is or stock-for-stock requires
- Shareholders acquire stock of a corporation solely for the voting stock of the acquiring corporation or parent
- The acquiring corporation must control the target corporation immediately after exchange
Type C reorganization is
when one corporation acquires all the assets of another in exchange for its voting stock or its parents
Type D reorganization is
a corporation transfers all or part of its assets to another in exchange for the others stock.
Type E reorganization is
the capital structure is modified by exchanges of stock and securities between the corporation and its shareholders
A distribution of stock or rights to acquire stock in a distributing corp. is not included in the recipient’s gross income unless
It is either a disproportionate distribution or a distribution instead of money or other property.
- a distribution in lieu of money
- a disproportionate distribution
- a distribution on preferred stock
- A distribution of convertible preferred stock
- a distribution of common & preferred stock, resulting in receipt of preferred stock by some shareholders & common stock by other shareholders
The filing of form 1099-DIV
- distributions in excess of $10 were made as dividends, capital gains, or nontaxable distributions
- tax was withheld under the backup withholding rules
- a liquidating payment of $600 was distributed
- Form 1099 MISC report royalties
Dividend income is limited to
The current & accumulated E&P of the corporation. Any additional distribution is treated as a non-taxable return of capital to the extent of shareholders basis
When the redemption is substantially disproportionate it is considered a sale if
The share holder must own less than 50% of all outstanding voting stock immediately after the redemption and own less than 80% immediately before redemption
The basis of property acquired by a corporation in connection with a Section 351 transaction is
the same basis in the hands of the transferor increased by the amount of gain recognized by the transferor
