corporations∶distributionsnotincompleteliquidation(编辑修改稿)

corporations∶distributionsnotincompleteliquidation(编辑修改稿)内容摘要：

nt shareholders only to the extent of the corporation’s E amp。 P and any excess over the basis in the stock investment. ANS: T A distribution is taxed to the extent of E amp。 P. Distributions in excess of E amp。 P are taxfree recoveries of capital to the extent of stock basis. Distributions in excess of stock basis trigger taxable gain (usually capital gain). PTS: 1 DIF: 1 REF: p. 192 | p. 193 OBJ: 1 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 4. Distributions that are not dividends are a return of capital and cause the shareholder’s capital account to increase. ANS: F Distributions that are a return of capital cause the shareholder’s stock basis to be reduced. PTS: 1 DIF: 1 REF: p. 193 OBJ: 1 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 5. Cash distributions received from a corporation with a positive balance in accumulated E amp。 P at the beginning of the year will always be taxed as dividend ine. ANS: F A positive balance in accumulated E amp。 P at the beginning of the year does not guarantee dividend treatment for distributions. If there is a deficit in current E amp。 P during the year, it may pletely offset the positive accumulated E amp。 P balance. If it does, the distributions will not receive dividend treatment. PTS: 1 DIF: 1 REF: p. 1910 | Concept Summary OBJ: 3 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 6. A distribution in excess of E amp。 P is treated as a recovery of capital by shareholders and is taxfree to the extent of stock basis. Corporations: Distributions Not in Complete Liquidation 197 ANS: T Distributions in excess of E amp。 P are a taxfree recovery of capital to the extent of stock basis. Distributions in excess of basis trigger capital gain. PTS: 1 DIF: 1 REF: Example 1 OBJ: 1 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 7. The terms “earnings and profits” and “retained earnings” are identical in meaning. ANS: F The notion of “earnings and profits” is similar in many respects to the accounting concept of “retained earnings.” Both are measures of the firm’s accumulated capital. A difference exists, however, in the way these figures are calculated. The putation of retained earnings is based on financial accounting rules while E amp。 P is determined using rules specified in the tax laws. PTS: 1 DIF: 1 REF: p. 193 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 8. To determine E amp。 P, some (but not all) previously excluded ine items are added back to taxable ine. ANS: F To determine E amp。 P, it is necessary to add all previously excluded ine items back to taxable ine. PTS: 1 DIF: 1 REF: p. 193 | Concept Summary OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 9. When puting current E amp。 P, taxable ine is not adjusted for the deferred gain in a 167。 1033 involuntary conversion. ANS: T PTS: 1 DIF: 1 REF: p. 194 | p. 195 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 10. Of the 167。 179 expense deducted in the current year, 80% must be added to this year’s taxable ine to determine current E amp。 P. ANS: T For E amp。 P purposes, only 20% of 167。 179 expense is deductible each year over a 5 year period. As a result, when 167。 179 expense is elected, 80% must be added back to taxable ine in the year of election to determine current E amp。 P. PTS: 1 DIF: 1 REF: p. 196 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 198 2020 Comprehensive Volume/Test Bank 11. Use of MACRS cost recovery when puting taxable ine requires an E amp。 P adjustment. ANS: T If MACRS cost recovery is used for ine tax purposes, a positive or negative adjustment equal to the difference between MACRS and ADS must be made each year. PTS: 1 DIF: 1 REF: p. 195 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 12. When a corporation makes an installment sale, for E amp。 P purposes the realized gain is recognized as payments are received. ANS: F The installment method is not available for E amp。 P purposes. Consequently, the entire gain is recognized in the year of sale. PTS: 1 DIF: 1 REF: p. 195 | Example 6 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 13. A corporation borrows money to purchase State of Wisconsin bonds. The interest on the loan has no effect on either taxable ine or current E amp。 P. ANS: F The interest does not reduce taxable ine, but it does reduce E amp。 P. PTS: 1 DIF: 1 REF: p. 194 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 14. Federal ine tax paid in the current year must be added back to taxable ine to determine E amp。 P. ANS: F Federal ine tax must be subtracted from taxable ine. PTS: 1 DIF: 1 REF: p. 194 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 15. When puting E amp。 P, no adjustment to taxable ine is necessary for the domestic production activities deduction. ANS: F The domestic production activities deduction must be added back to taxable ine to determine current E amp。 P. PTS: 1 DIF: 1 REF: p. 193 | Concept Summary OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min Corporations: Distributions Not in Complete Liquidation 199 16. Nondeductible meal and entertainment expenses must be subtracted from taxable ine to determine current E amp。 P. ANS: T Nondeductible meal and entertainment expenses reduce current E amp。 P. PTS: 1 DIF: 1 REF: p. 194 | Concept Summary OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 17. The dividends received deduction is added back to taxable ine to determine E amp。 P. ANS: T The dividends received deduction does not reflect a true reduction in the corporation’s ability to pay a dividend. Consequently, it is added back to taxable ine to determine E amp。 P. PTS: 1。