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3 Cards in this Set
- Front
- Back
A ________ occurs when a corporation pays out cash/property to shareholders without requiring something in return. A ______ is when a corporation pays, but gets outstanding stock in return.
-Redemptions - most treated as a recognized captial gain / loss (unless everyone sells a fixed proportion - distribution) -Distributions: can be taxed 1 of 3 ways: 1. ________ - special 15% rate 2. _________ - nontaxable, but does ________. 3. _________ - if distribution large enough to reduce basis to zero - this is rest. Ex: A's basis in stock is $7000, receives $10,000 nontaxable ROC. Consequnce? |
distribution; redemption;
1. dividend 2. return of captial; reduce basis; 3. capital gain; Ex: $0 basis in the stock and $3000 capital gain. |
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When are considered dividends?
Tax _________ ~= GAAP NI Tax _________ ~= GAAP RE However, current earnings and profits is not the same as taxable income: Additions: 1. _______ - not in TI, but in CE&P / NI. 2. _______ - like from NOL carrybacks, increase CE&P / NI. 3. ________ - decrease CY TI, but not CY CP&E / NI 4. ________ Subtractions: 1. __________ - don't get to deduct from TI (duh), but do get to for CE&P / NI 2. Nondeductible _______ - do get to reduce CE&P and NI, not TI. ** Also, ______ is more generous to TI, than CE&P, so add-back some Earnings in early years of asset's life. _________ - is the sum of all PY CE&P minus all distributions paid. The distributions are considered dividends if there is enough ____ OR _____ to cover. Example: AP&R = -50,000, CP&E = 100,000. Distr. = 75,000. What is it? |
Current Earnings & Profits
Accumulated Earnings & Profits 1. Muni bond interest 2. Federal Tax refund 3. Federal Tax deduction 4. Corp. Dividends received 1. Federal Taxes paid 2. fines / penalties depreciation AE&P AE&P OR CE&P Ex: ALL DIVIDENDS - because there is enough CE&P to cover. |
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Property Distributions:
Corporation must recognize ____, but never _____. (If not taxed - can avoid double tax, if allow losses, corps could 'manage' TI). Gain may be Ordinary or Capital. Shareholders' basis in property is ___ and taxed as distributions, ie. _____ income. _______ dividends: occurs when shareholders receive benefit without formal declaration: ie. unreasonably large ______, use of ________, below market ______, etc. These are taxed the same as dividends if enough CE&P/AE&P. Ex: Shareholder receives $150 in income. Fair amount $40. TI deduction? Stock dividends: A nonevent, just simply change _____. |
Gains; Losses; FMV; dividend;
Constructive; compensation; corporate jet; loans; Ex: Only $40 for TI (Dividends are deductible from CE&P? so full $150 for that?) basis. |