A nonliquidating teenage dating

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A nonliquidating

For 2011, Locke had current earnings\r\nand profits of ,000 and made two ,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of ,000 and a fair market value of ,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is 0.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of 0 on the distribution (0 FMV - 0 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of 0. On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had ,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n0,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a 0 mortgage attached to the property.If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 0,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87.

bad debts44) The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to A. Pantaloon is leasing its current building for 4 per year.Distributions to shareholders generally receive preferential tax treatment: Dividends must be included in gross income (albeit generally taxed at a lower tax rate). What amount of the 2011 distributions is classified as dividend income to Locke’s shareholders? Determining the Dividend Example 2 Current E&P = (

For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200.

On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

,000,000) Accumulated E&P =

For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200.

On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

,000,000 The corporation distributes

For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200.

On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

M on July 1. Stock Redemptions Form of a Stock Redemption A redemption occurs when a corporation acquires its stock from a shareholder in exchange for property It does not matter if the acquired stock is canceled, retired, or held as treasury stock.Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of 0,000 and a fair market value of 0,000 to Reed, its sole shareholder. AE&P as of July 1 =

For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200.

On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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For 2011, Locke had current earnings\r\nand profits of $20,000 and made two $40,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of $30,000 and a fair market value of $20,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is $100.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of $100 on the distribution ($200 FMV - $100 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200.

On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had $30,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n$400,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a $100 mortgage attached to the property.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

M) = 0,000^ 0,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.On that date, it sold a plot of land to a\r\nnoncorporate stockholder for ,000. ,000\r\n\r\n Overview of distributions:\r\n The portion of a distribution that is a dividend is included in the shareholder\u2019s gross income.\r\n The portion of the distribution that is not a dividend reduces the shareholder\u2019s tax basis in the corporation\u2019s stock\r\n The portion of the distribution that is not a dividend and is in excess of the shareholder\u2019s stock tax basis is treated as gain from sale or exchange of the stock\r\n\r\n\r\n Computing Earnings and Profits\r\n\r\n A \u201cdividend\u201d for tax purposes is:\r\n\r\nany distribution of property made by a corporation to its shareholders out of its earnings and profits (E& P)\r\n\r\n Two separate E& P concepts must be understood \r\n Current earnings and profits\r\n Accumulated earnings and profits\r\n\r\n Current E& P not distributed to shareholders is added to accumulated E& P at the beginning of the next taxable year\r\n\r\n Determining the Dividend\r\n\r\n Computing Earnings and Profits from Taxable Income\r\n\r\n Adjustments to taxable income fall into four broad categories:\r\n\r\n Income that is excluded from taxable income\r\n\r\n Deductions that do not require an economic outflow\r\n\r\n Deduction of expenses that require an economic outflow but are not deducted for computing taxable income\r\n\r\n Adjustment of timing for deductions or income because of accounting methods required for E& P computation\r\n\r\n Determining the Dividend\r\n\r\n Earnings and Profits\r\n\r\n81. 0 \t 0\r\n\r\n Stock Dividend Holding Period\r\n\r\n In January 2012, Joan Hill bought one share of Orban\r\n Corp. On March 1, 2012, Orban distributed\r\none share of preferred stock for each share of common stock\r\nheld. On March 1, 2012,\r\n Joan\u2019s one share of common stock had a fair market value of\r\n0, while the preferred stock had a fair market value of\r\n0. The holding period for the preferred stock starts in\r\na. Because of his inactivity\r\nin the business in recent years, Mark has decided to\r\nretire from the business and wishes to sell his stock. 302(b)(2):\r\n The shareholder owns less than 50 percent of the voting power immediately after the exchange\r\n The shareholder\u2019s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption\r\n In computing the percentage ownership tests, constructive ownership rules under Sec.Ral had paid ,000\r\nfor the land in 2003, and it had a fair market value of\r\n,000 when the stockholder bought it. At the beginning of the year, Cable, a C corporation,\r\nhad accumulated earnings and profits of 0,000. Accordingly,\r\n Pike will distribute cash of 0,000 in redemption\r\nof all of the stock owned by Mark. 318 must be used:\r\n Family attribution (spouse, children, grandchildren, parents)\r\n Attribution from entities to owners or beneficiaries\r\n Attribution from owners or beneficiaries to entities\r\n Option attribution\r\n\r\n Stock Redemptions\r\n\r\n Example\r\n\r\n\t A shareholder owns 60 of the corporation\u2019s 100 shares of voting common stock before the redemption.\r\n\r\n What percentage ownership test(s) must be met for the shareholder to receive exchange treatment under \u00a7302(b)(2)? Spartan redeems all of Shareholder A\u2019s stock on July 1 for ,000.

Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of 0. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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bad debts44) The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to A. Pantaloon is leasing its current building for $384 per year.

Distributions to shareholders generally receive preferential tax treatment: Dividends must be included in gross income (albeit generally taxed at a lower tax rate). What amount of the 2011 distributions is classified as dividend income to Locke’s shareholders? Determining the Dividend Example 2 Current E&P = ($1,000,000) Accumulated E&P = $1,000,000 The corporation distributes $1M on July 1. Stock Redemptions Form of a Stock Redemption A redemption occurs when a corporation acquires its stock from a shareholder in exchange for property It does not matter if the acquired stock is canceled, retired, or held as treasury stock.

Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.

On that date, it sold a plot of land to a\r\nnoncorporate stockholder for $50,000. $30,000\r\n\r\n Overview of distributions:\r\n The portion of a distribution that is a dividend is included in the shareholder\u2019s gross income.\r\n The portion of the distribution that is not a dividend reduces the shareholder\u2019s tax basis in the corporation\u2019s stock\r\n The portion of the distribution that is not a dividend and is in excess of the shareholder\u2019s stock tax basis is treated as gain from sale or exchange of the stock\r\n\r\n\r\n Computing Earnings and Profits\r\n\r\n A \u201cdividend\u201d for tax purposes is:\r\n\r\nany distribution of property made by a corporation to its shareholders out of its earnings and profits (E& P)\r\n\r\n Two separate E& P concepts must be understood \r\n Current earnings and profits\r\n Accumulated earnings and profits\r\n\r\n Current E& P not distributed to shareholders is added to accumulated E& P at the beginning of the next taxable year\r\n\r\n Determining the Dividend\r\n\r\n Computing Earnings and Profits from Taxable Income\r\n\r\n Adjustments to taxable income fall into four broad categories:\r\n\r\n Income that is excluded from taxable income\r\n\r\n Deductions that do not require an economic outflow\r\n\r\n Deduction of expenses that require an economic outflow but are not deducted for computing taxable income\r\n\r\n Adjustment of timing for deductions or income because of accounting methods required for E& P computation\r\n\r\n Determining the Dividend\r\n\r\n Earnings and Profits\r\n\r\n81. $150 \t $150\r\n\r\n Stock Dividend Holding Period\r\n\r\n In January 2012, Joan Hill bought one share of Orban\r\n Corp. On March 1, 2012, Orban distributed\r\none share of preferred stock for each share of common stock\r\nheld. On March 1, 2012,\r\n Joan\u2019s one share of common stock had a fair market value of\r\n$450, while the preferred stock had a fair market value of\r\n$150. The holding period for the preferred stock starts in\r\na. Because of his inactivity\r\nin the business in recent years, Mark has decided to\r\nretire from the business and wishes to sell his stock. 302(b)(2):\r\n The shareholder owns less than 50 percent of the voting power immediately after the exchange\r\n The shareholder\u2019s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption\r\n In computing the percentage ownership tests, constructive ownership rules under Sec.

Ral had paid $40,000\r\nfor the land in 2003, and it had a fair market value of\r\n$80,000 when the stockholder bought it. At the beginning of the year, Cable, a C corporation,\r\nhad accumulated earnings and profits of $100,000. Accordingly,\r\n Pike will distribute cash of $500,000 in redemption\r\nof all of the stock owned by Mark. 318 must be used:\r\n Family attribution (spouse, children, grandchildren, parents)\r\n Attribution from entities to owners or beneficiaries\r\n Attribution from owners or beneficiaries to entities\r\n Option attribution\r\n\r\n Stock Redemptions\r\n\r\n Example\r\n\r\n\t A shareholder owns 60 of the corporation\u2019s 100 shares of voting common stock before the redemption.\r\n\r\n What percentage ownership test(s) must be met for the shareholder to receive exchange treatment under \u00a7302(b)(2)? Spartan redeems all of Shareholder A\u2019s stock on July 1 for $80,000.

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bad debts44) The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to A. Pantaloon is leasing its current building for $384 per year.Distributions to shareholders generally receive preferential tax treatment: Dividends must be included in gross income (albeit generally taxed at a lower tax rate). What amount of the 2011 distributions is classified as dividend income to Locke’s shareholders? Determining the Dividend Example 2 Current E&P = ($1,000,000) Accumulated E&P = $1,000,000 The corporation distributes $1M on July 1. Stock Redemptions Form of a Stock Redemption A redemption occurs when a corporation acquires its stock from a shareholder in exchange for property It does not matter if the acquired stock is canceled, retired, or held as treasury stock.Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.On that date, it sold a plot of land to a\r\nnoncorporate stockholder for $50,000. $30,000\r\n\r\n Overview of distributions:\r\n The portion of a distribution that is a dividend is included in the shareholder\u2019s gross income.\r\n The portion of the distribution that is not a dividend reduces the shareholder\u2019s tax basis in the corporation\u2019s stock\r\n The portion of the distribution that is not a dividend and is in excess of the shareholder\u2019s stock tax basis is treated as gain from sale or exchange of the stock\r\n\r\n\r\n Computing Earnings and Profits\r\n\r\n A \u201cdividend\u201d for tax purposes is:\r\n\r\nany distribution of property made by a corporation to its shareholders out of its earnings and profits (E& P)\r\n\r\n Two separate E& P concepts must be understood \r\n Current earnings and profits\r\n Accumulated earnings and profits\r\n\r\n Current E& P not distributed to shareholders is added to accumulated E& P at the beginning of the next taxable year\r\n\r\n Determining the Dividend\r\n\r\n Computing Earnings and Profits from Taxable Income\r\n\r\n Adjustments to taxable income fall into four broad categories:\r\n\r\n Income that is excluded from taxable income\r\n\r\n Deductions that do not require an economic outflow\r\n\r\n Deduction of expenses that require an economic outflow but are not deducted for computing taxable income\r\n\r\n Adjustment of timing for deductions or income because of accounting methods required for E& P computation\r\n\r\n Determining the Dividend\r\n\r\n Earnings and Profits\r\n\r\n81. $150 \t $150\r\n\r\n Stock Dividend Holding Period\r\n\r\n In January 2012, Joan Hill bought one share of Orban\r\n Corp. On March 1, 2012, Orban distributed\r\none share of preferred stock for each share of common stock\r\nheld. On March 1, 2012,\r\n Joan\u2019s one share of common stock had a fair market value of\r\n$450, while the preferred stock had a fair market value of\r\n$150. The holding period for the preferred stock starts in\r\na. Because of his inactivity\r\nin the business in recent years, Mark has decided to\r\nretire from the business and wishes to sell his stock. 302(b)(2):\r\n The shareholder owns less than 50 percent of the voting power immediately after the exchange\r\n The shareholder\u2019s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption\r\n In computing the percentage ownership tests, constructive ownership rules under Sec.Ral had paid $40,000\r\nfor the land in 2003, and it had a fair market value of\r\n$80,000 when the stockholder bought it. At the beginning of the year, Cable, a C corporation,\r\nhad accumulated earnings and profits of $100,000. Accordingly,\r\n Pike will distribute cash of $500,000 in redemption\r\nof all of the stock owned by Mark. 318 must be used:\r\n Family attribution (spouse, children, grandchildren, parents)\r\n Attribution from entities to owners or beneficiaries\r\n Attribution from owners or beneficiaries to entities\r\n Option attribution\r\n\r\n Stock Redemptions\r\n\r\n Example\r\n\r\n\t A shareholder owns 60 of the corporation\u2019s 100 shares of voting common stock before the redemption.\r\n\r\n What percentage ownership test(s) must be met for the shareholder to receive exchange treatment under \u00a7302(b)(2)? Spartan redeems all of Shareholder A\u2019s stock on July 1 for $80,000.

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