25 May Question 1. Distributions by a corporation to its shareholders are presumed to be
Question
1. Distributions by a corporation to its shareholders are presumed to be a dividend unless the parties can prove otherwise.
a. True
b. False
2. A distribution from a corporation will be taxable to the recipient shareholders only to the extent of the corporation’s E & P.
a. True
b. False
3. Distributions that are not dividends are a return of capital and decrease the shareholder’s basis.
a. True
b. False
4. Cash distributions received from a corporation with a positive balance in accumulated E & P at the beginning of the year will be taxed as dividend income.
a. True
b. False
5. A distribution in excess of E & P is treated as capital gain by shareholders.
a. True
b. False
6. The terms “earnings and profits” and “retained earnings” are identical in meaning.
a. True
b. False
7. To determine E & P, some (but not all) previously excluded income items are added back to taxable income.
a. True
b. False
8. When computing E & P, taxable income is not adjusted for § 179 expense.
a. True
b. False
9. When computing current E & P, taxable income must be adjusted for the deferred gain in a § 1031 likekind exchange.
a. True
b. False
10.An increase in the LIFO recapture amount must be added to taxable income to determine E & P.
a. True
b. False
11.Use of MACRS cost recovery when computing taxable income does not require an E & P adjustment.
a. True
b. False
12.No E & P adjustment is required for regular tax gains under the installment meth
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