CORPORATE TAX EXAM QUESTIONS
AND ANSWERS
pro rata - Answer-if (in scenario 1) distributions happen at the same time, how do you
allocate accumulated E&P?
no - Answer-if current E&P is positive, and accumulated E&P is negative, do you net
accumulated with current?
to the extent of - Answer-in scenario 2, the distribution is deemed to be a taxable
dividend ____ _____ ________ ____ positive current E&P
yes - Answer-if accumulated E&P is positive and current E&P is negative, do you net
accumulated with current?
pro rata - Answer-if positive accumulated E&P is netted with negative current E&P, how
do you allocate E&P to the distribution?
allocated ratably - Answer-any loss in current E&P (scenario 3) is _________
____________ throughout the year unless the parties can show otherwise
return of capital - Answer-if both accumulated and current E&P are negative, the
distribution is treated as a __________ _____ __________
stock basis, capital gain - Answer-if E&P won't cover the full distribution, the distribution
is treated as a dividend up to the amount of E&P, then it reduces the shareholder's
______ _________, and any excess is treated as a __________ _______
amount distributed - Answer-for nonliquidating cash distributions, shareholders will
record a distribution equal to the __________ ________________
FMV - Answer-for nonliquidating distributions of property other than cash, the
shareholder's distribution amount is equal to the property's _________ on the
distribution date
reduces - Answer-the amount of any liability assumed by the shareholder in a
distribution _________ the distribution amount (but never below 0)
FMV - Answer-what is the shareholder's basis in property received in a distribution?
no - Answer-is the shareholder's basis reduced by any liabilities assumed by the
shareholder in a property distribution?
, yes - Answer-is the shareholder's distribution amount reduced by any liabilities assumed
by the shareholder in a property distribution?
ex dividend date - Answer-the date in which the dividend amount is no longer
incorporated into the stock price
qualified dividends - Answer-paid by domestic or certain qualified foreign corporations
that are eligible for lower capital gains rates, or paid on stock held for more than 60
days during the 121-day period beginning 60 days before the ex-dividend date
0%, 15%, 20% - Answer-the three qualified dividend rates for individual taxpayers
ordinary tax rate - Answer-nonqualified dividends are taxed at what rate?
yes - Answer-when a corporation distributes appreciated property, does it recognize
gain?
no - Answer-when a corporation distributed depreciated property, does it recognize a
loss?
sell it - Answer-what can a corporation do if they want to distribute depreciated property
to shareholders but they want to be able to recognize a loss?
no less - Answer-if the shareholder assumes any liabilities in the distribution, in order to
calculate the corporation's gain, the property's FMV is _____ ________ than the
amount of the liability
E&P gain - Answer-E&P is increased by any _____ ________ from the distribution of
appreciated property
decreased - Answer-is E&P decreased or increased by the amount of money
distributed?
decreased - Answer-is E&P decreased or increased by the greater of FMV or E&P
adjusted basis of noncash property distributed, less the amount of liability on the
property?
greater of FMV or E&P adjusted basis less liabilities assumed - Answer-E&P is
decreased by what when a corporation makes a property distribution?
stock dividend - Answer-a distribution of additional shares of stock to the shareholders
of a corporation
stock split - Answer-every shareholder receives an additional share of stock for every
share they already own
AND ANSWERS
pro rata - Answer-if (in scenario 1) distributions happen at the same time, how do you
allocate accumulated E&P?
no - Answer-if current E&P is positive, and accumulated E&P is negative, do you net
accumulated with current?
to the extent of - Answer-in scenario 2, the distribution is deemed to be a taxable
dividend ____ _____ ________ ____ positive current E&P
yes - Answer-if accumulated E&P is positive and current E&P is negative, do you net
accumulated with current?
pro rata - Answer-if positive accumulated E&P is netted with negative current E&P, how
do you allocate E&P to the distribution?
allocated ratably - Answer-any loss in current E&P (scenario 3) is _________
____________ throughout the year unless the parties can show otherwise
return of capital - Answer-if both accumulated and current E&P are negative, the
distribution is treated as a __________ _____ __________
stock basis, capital gain - Answer-if E&P won't cover the full distribution, the distribution
is treated as a dividend up to the amount of E&P, then it reduces the shareholder's
______ _________, and any excess is treated as a __________ _______
amount distributed - Answer-for nonliquidating cash distributions, shareholders will
record a distribution equal to the __________ ________________
FMV - Answer-for nonliquidating distributions of property other than cash, the
shareholder's distribution amount is equal to the property's _________ on the
distribution date
reduces - Answer-the amount of any liability assumed by the shareholder in a
distribution _________ the distribution amount (but never below 0)
FMV - Answer-what is the shareholder's basis in property received in a distribution?
no - Answer-is the shareholder's basis reduced by any liabilities assumed by the
shareholder in a property distribution?
, yes - Answer-is the shareholder's distribution amount reduced by any liabilities assumed
by the shareholder in a property distribution?
ex dividend date - Answer-the date in which the dividend amount is no longer
incorporated into the stock price
qualified dividends - Answer-paid by domestic or certain qualified foreign corporations
that are eligible for lower capital gains rates, or paid on stock held for more than 60
days during the 121-day period beginning 60 days before the ex-dividend date
0%, 15%, 20% - Answer-the three qualified dividend rates for individual taxpayers
ordinary tax rate - Answer-nonqualified dividends are taxed at what rate?
yes - Answer-when a corporation distributes appreciated property, does it recognize
gain?
no - Answer-when a corporation distributed depreciated property, does it recognize a
loss?
sell it - Answer-what can a corporation do if they want to distribute depreciated property
to shareholders but they want to be able to recognize a loss?
no less - Answer-if the shareholder assumes any liabilities in the distribution, in order to
calculate the corporation's gain, the property's FMV is _____ ________ than the
amount of the liability
E&P gain - Answer-E&P is increased by any _____ ________ from the distribution of
appreciated property
decreased - Answer-is E&P decreased or increased by the amount of money
distributed?
decreased - Answer-is E&P decreased or increased by the greater of FMV or E&P
adjusted basis of noncash property distributed, less the amount of liability on the
property?
greater of FMV or E&P adjusted basis less liabilities assumed - Answer-E&P is
decreased by what when a corporation makes a property distribution?
stock dividend - Answer-a distribution of additional shares of stock to the shareholders
of a corporation
stock split - Answer-every shareholder receives an additional share of stock for every
share they already own
