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Exam 5: Corporations: Earnings and Profits and Dividend Distributions

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Question 71

Multiple Choice

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Which of the following statements is incorrect with respect to determining current E & P?

A) All tax-exempt income should be added back to taxable income.
B) Dividends received deductions should be added back to taxable income.
C) Current-year charitable contributions in excess of the 10% of taxable income limit should be subtracted from taxable income.
D) Federal income tax refunds should be added back to taxable income.
E) None of these statements are incorrect.

F) A) and B)
G) D) and E)

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Question 72

Multiple Choice

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Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2019. -Dividends received deduction.

A) Increase
B) Decrease
C) No effect

D) A) and C)
E) All of the above

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Question 73

True/False

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Corporate distributions are presumed to be paid out of E & P and are treated as dividends unless the parties to the transaction can show otherwise.

Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2019. -Section 179 expense in second year following election.

When computing current E & P, taxable income must be adjusted for the deferred gain in a § 1031 like-kind exchange.

Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2019. -Meal expense not deducted in 2019 because of the 50% limitation.

The terms "earnings and profits" and "retained earnings" are identical in meaning.

If a distribution of stock rights is taxable and their fair market value is less than 15 percent of the value of the old stock, then either a zero basis or a portion of the old stock basis may be assigned to the rights at the shareholder's option.

At the beginning of the current year, both Doug and Amelia each own 50% of Amaryllis Corporation a calendar year taxpayer) . In July, Doug sold his stock to Kevin for $140,000. At the beginning of the year, Amaryllis Corporation had accumulated E & P of $240,000 and its current E & P is $280,000 prior to any distributions) . Amaryllis distributed $300,000 on February 15 $150,000 to Doug and $150,000 to Amelia) and distributed another $300,000 on November 1 $150,000 to Kevin and $150,000 to Amelia) . Kevin has dividend income of: