M8-Entity/Owner Transactions Flashcards
Accumulated earnings and profits include all prior and current year earnings and profits at year end. (true or false)
true
Losses resulting from the sale, exchange or worthlessness of Section 1244 stock (also called small business stock) are treated as ordinary losses up to $50,000 in any tax year. (true or false)
true
However, this loss is available only to original owners of the stock.
If a corporation has accumulated E&P or current year E&P, the distribution (depending upon amount) would be taxable as a dividend. (true or false)
true
The excess will be treated as a return of basis and any remaining excess will be capital gain.
When a corporation liquidates and distributes assets to shareholders, gain is recognized to the extent that the FMV of assets distributed to a shareholder exceeds the shareholder’s basis in the corporation’s stock. (true or false)
true
The acquisition of a controlling (usually 80%) interest by one corporation in the stock of another corporation solely for stock is a tax-free (type b) reorganization. (true or false)
true
The corporation generally deducts its liquidation expenses (i.e., filing fees, professional fees) on its final tax return. (true or false)
true
Shareholders treat property received in a complete liquidation of a corporation as full payment for their stock. Therefore, the shareholder must recognize capital gain or loss equal to the difference between the FMV of the property received and the basis of the stock surrendered. (true or false)
true
What is a type A reorganization?
A+B = C
Generally no gain or loss is recognized by the shareholders of the various corporations except when they receive cash or other consideration in addition to the stock or securities. In addition, no gain or loss is recognized by the acquired corporations or the acquiring corporation pursuant to a tax-free reorganization.
What amount of gain or loss is recognized by either the parent corporation or the subsidiary corporation when the parent, who owns at least 80% of the stock, liquidates its subsidiary?
No gain or loss
No gain or loss is recognized in this type of liquidation, and the parent assumes the carryover basis of all assets and liabilities of the subsidiary. (true or false)
true
In a liquidating distribution, the shareholder recognizes a capital gain to the extent that the FMV of the assets received exceeds the shareholder’s basis in the stock. (true or false)
true
