Multiple choice | Accounting homework help

1) Identify which of the following statements is true.

A. Section 179 property must be expensed ratably over a 5-year period when computing E&P. 

B. Losses on property sales to related parties are not deductible when computing E&P. 

C. Distributions made out of accumulated E&P are allocated ratably between multiple distributions made during the tax year. 

D. All are false. 

2) A corporation distributes land and the related liability to Meg, its sole shareholder. The land has a FMV of $60,000 and is subject to a liability of $70,000. The corporation has current and accumulated E&P of $80,000. The corporation’s adjusted basis for the property is $70,000. What effect does the transaction have on the corporation?

A. A recognized loss of $10,000 and its E&P is unchanged. 

B. No recognized gain or loss and its E&P is reduced by $60,000. 

C. No recognized gain or loss and its E&P is unchanged by the distribution. 

D. A recognized loss of $10,000 and its E&P is reduced by $70,000 

3) One consequence of a property distribution by a corporation to a shareholder is

A. the holding period of the distributed property includes the holding period of the distributing corporation 

B. the shareholder’s basis in the distributed property is the same as the distributing corporation’s basis 

C. any liabilities assumed by the shareholder do not reduce the shareholder’s basis 

D. the amount of the distribution is increased by any liability assumed by the shareholder 

4) Joshua owns 100% of Steeler Corporation’s stock. Joshua’s basis in the stock is $8,000. Steeler Corporation has E&P of $40,000. If Steeler Corporation redeems 60% of Joshua’s stock for $50,000, Joshua must report dividend income of

A. $8,000 

B. $40,000 

C. $50,000 

D. $0