Chapter 18 corporate taxation nonliquidating distributions the difference between dating and being in a relationship

The company had no formal compensation policy and never paid a dividend. How much of Tammy’s bonus might the IRS recharacterize as a dividend? [LO4] Hoosier Corporation declared a 2-for-1 stock split to all shareholders of record on March 25 of this year.

Hoosier reported current E&P of 0,000 and accumulated E&P of ,000,000.

chapter 18 corporate taxation nonliquidating distributions-42

The 500 outstanding shares are owned as follows: Nick Adams serves as President of PSQ, and his father Sandler serves as Chairman of the Board.

Amy is the company’s CFO, and Abigail and Charlie work as employees of the company. The redemption is tentatively scheduled to take place on December 31 of this year.

Bonnie owns 60 shares with a basis of $3,000, and Clyde owns the remaining 40 shares with a basis of $12,000. Getaway has $20,000 of E&P at year end and Bonnie is unrelated to Clyde. Rusty, an individual, owns 100% of Spartan Corporation.

[LO5] Bonnie and Clyde are the only two shareholders in Getaway Corporation. Getaway has $20,000 of E&P at year end and Clyde is unrelated to Bonnie. [LO6] Spartan Corporation made a distribution of $500,000 to Rusty Cedar in partial liquidation of the company on December 31 of this year.

[LO5] EG Corporation redeemed 200 shares of stock from one of its shareholders in exchange for $200,000. Rusty’s income tax basis in the shares was $50 per share.

The redemption represented 20% of the corporation’s outstanding stock. Spartan had total E&P of ,000,000 at the time of the distribution. What is the amount and character (capital gain or dividend) of any income or gain recognized per share by Rusty as a result of the partial liquidation? Assuming Spartan made no other distributions to Rusty during the year, by what amount does Spartan reduce its total E&P as a result of the partial liquidation? [LO6] Wolverine Corporation made a distribution of 0,000 to Rich Rod, Inc. The distribution was in exchange for 50% of Rich Rod, Inc.’s stock in the company. [LO2] Beaver Corporation reported taxable income of 0,000 from operations this year.The company paid federal income taxes of 0,000 on this taxable income.The redemption was treated as an exchange by the shareholder. in partial liquidation of the company on December 31 of this year. At the time of the distribution, the shares had a fair market value of 0 per share.By what amount does EG reduce its total E&P as a result of the redemption under the following E&P assumptions? EG’s total E&P at the time of the distribution was ,000,000. EG’s total E&P at the time of the distribution was 0,000. [LO5] Spartan Corporation redeemed 25% of its shares for ,000 on July 1 of this year, in a transaction that qualified as an exchange under §302(a). Rich Rod, Inc.’s income tax basis in the shares was per share. Assuming Wolverine made no other distributions to Rich Rod, Inc.In addition, Flower received ,000 of life insurance proceeds due to the death of an employee (Flower paid 0 in life insurance premiums this year). At the end of each year, the company pays Tammy a “bonus” equal to the difference between the corporation’s taxable income for the year (before the bonus) and ,000.

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