Question

Dividends

1. A distribution by a corporation to a shareholder with respect to its stock will constitute a capital gain to a shareholder:
   1. Only when there are “earnings and profits” of a corporation
   2. Only when there are no “earnings and profits” of a corporation
   3. To the extent of the shareholder’s basis in the stock
   4. To the extent a distribution exceeds a shareholder’s basis in his stock
2. If a corporation has current year earnings and profits and negative accumulated earnings and profits a distribution by a corporation to a shareholder with respect to its stock will:
   1. Be a divided to the extent of the sum of the current and accumulated earnings and profits
   2. Be a dividend to the extent of the accumulated earnings and profits
   3. Be a dividend to the extent of the current earnings and profits
   4. Be a dividend to the extent of the accumulated earnings and profits and current earnings and profits where the current earnings and profits are prorated to the date of distribution
3. If a corporation has a current year loss in earnings and profits and accumulated earnings and profits a distribution by a corporation to a shareholder with respect to its stock will:
   1. Be a divided to the extent of the sum of the current and accumulated earnings and profits
   2. Be a dividend to the extent of the accumulated earnings and profits
   3. Be a dividend to the extent of the current earnings and profits
   4. Be a dividend to the extent of the accumulated earnings and profits and current earnings and profits where the current earnings and profits are prorated to the date of distribution
4. Certain items deducted in computing a corporation's current year taxable income are added back to compute “earnings and profits” because:
   1. They represent deductions to be taken in a future year
   2. They were already deducted in computing taxable income
   3. They represent actual cash expenditures of the corporation in the current year
   4. They do not represent actual expenses or expenditures paid for by the corporation in the current year
5. On a nonliquiddating distribution of appreciated property and depreciated property to a shareholder in corporation will recognize:
   1. Loss but no gain
   2. Gain but not loss
   3. Gain and loss
   4. Neither gain nor loss
6. On a nonliquidating distribution of appreciated property subject to debt, in terms of computing the corporation’s gain, if any:
   1. The fair market value used by the corporation in measuring its gain will always be less than the debt
   2. The fair market value used by the corporation in measuring its gain cannot be more than the debt
   3. The fair market value used by the corporation in measuring its gain cannot be less than the debt
   4. Their fair market value is not impacted by the amount of the debt
7. On a nonliquidating distribution of appreciated property subject to debt, in terms of computing the shareholder’s dividend:
   1. The fair market value is the amount of the distribution to the shareholder
   2. The fair market value less the debt is the amount of the distribution to the shareholder
   3. The fair market value plus the debt is the amount of the distribution
   4. The amount of the distribution depends on the amount of “earnings and profits”

Answer 1

A distribution by a corporation to a shareholder with respect to its stock will constitute a capital gain to a shareholder

To the extent a distribuition exceeds a shareholders basis in his stock

If a corporation has current year earnings and profits and negative accumulated earnings and profits a distribution by a corporation to a shareholder with respect to its stock will:

Be a dividend to the extent of the current earnings and profits

If a corporation has a current year loss in earnings and profits and accumulated earnings and profits a distribution by a corporation to a shareholder with respect to its stock will:

Be a dividend to the extent of the accumulated earnings and profits

Certain items deducted in computing a corporation's current year taxable income are added back to compute “earnings and profits” because:

They were already deducted in computing taxable income

On a nonliquiddating distribution of appreciated property and depreciated property to a shareholder in corporation will recognize:

Neither gain nor loss

On a nonliquidating distribution of appreciated property subject to debt, in terms of computing the corporation’s gain, if any:

The fair market value used by the corporation in measuring its gain cannot be less than the debt

On a nonliquidating distribution of appreciated property subject to debt, in terms of computing the shareholder’s dividend:

The amount of the distribution depends on the amount of “earnings and profits”