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TAX 4001 - Chapter 18 Quiz
TAX 4001 - Chapter 18 Quiz
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TAX 4001 - Chapter 18 QuizA calendar-year corporation has positive current E&P of $500 and accumulated
negative E&P of $1,200. The corporation makes a $400 distribution to its sole
shareholder. Which of the following statements is true? - ANS-The distribution will be a
dividend because current earnings and profits are positive and exceed the distribution.
Aztec Company reports current E&P of $200,000 in 20X3 and accumulated E&P at the
beginning of the year of negative $100,000. Aztec distributed $300,000 to its sole
shareholder on January 1, 20X3. How much of the distribution is treated as a dividend
in 20X3? - ANS-$200,000.
Boulder Company reports current E&P of $500,000 this year and accumulated negative
E&P at the beginning of the year of $200,000. Boulder distributed $400,000 to its sole
shareholder on December 31 of this year. How much of the distribution is treated as a
dividend this year? - ANS-$400,000
Bruin Company reports current E&P of $200,000 in 20X3 and accumulated E&P at the
beginning of the year of $100,000. Bruin distributed $400,000 to its sole shareholder on
January 1, 20X3. How much of the distribution is treated as a dividend in 20X3? -
ANS-$300,000.
Bruin Company reports current E&P of $390,000 in 20X3 and accumulated E&P at the
beginning of the year of $195,000. Bruin distributed $590,000 to its sole shareholder on
January 1, 20X3. How much of the distribution is treated as a dividend in 20X3? -
ANS-$585,000
$390,000 + $195,000 = $585,000
Catamount Company had current and accumulated E&P of $550,000 at December 31,
20X3. On December 31, the company made a distribution of land to its sole
shareholder, Caroline West. The land's fair market value was $250,000 and its tax and
E&P basis to Catamount was $275,000. The tax consequences of the distribution to
Catamount in 20X3 would be: - ANS-No loss recognized and a reduction in E&P of
$275,000.
Comet Company is owned equally by Pat and his sister Pam, each of whom hold 110
shares in the company. Pam wants to reduce her ownership in the company, and it was
decided that the company will redeem 55 of her shares for $1,100 per share on
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