Question

2. Bob, the sole shareholder of Perez Corporation, (a regular C corporation), has the corporation pay him $100,000. You are a Tax Accountant for Perez. What would you advise Bob?

3. The tax treatment of corporate distributions at the shareholder level does not depend on: (please explain in detail)

	a.	The character of the property being distributed.
	b.	The earnings and profits of the corporation.
	c.	The basis of stock in the hands of the shareholder.
	d.	Whether the distributed property is received by an individual or a corporation.

4. Subba Corporation has E & P of $240,000. Subba distributes airplane with a fair market value of $70,000 (adjusted basis of $25,000) to its sole shareholder, Mr. Pranay. Assume taxable transaction. The Airplane is subject to a liability of $55,000 that Pranay assumes. Pranay has: (explaination )

	a.	A taxable dividend of $15,000.
	b.	A taxable dividend of $25,000.
	c.	A taxable dividend of $45,000.
	d.	A taxable dividend of $70,000.
	e.	A basis in the machinery of $55,000.

Answer 1