Part I:
Question 1: A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?
Question 2: Grand River Corporation reported taxable income of $500,000 in 2010 and paid federal income taxes of $170,000. Not included in the computation was a disallowed meals and entertainment expense of $2,000, tax-exempt income of $1,000, and deferred gain on an installment sale of $25,000. The corporation's current earnings and profits for 2010 would be
Question 3: Au Sable Corporation reported taxable income of $800,000 in 2010 and paid federal income taxes of $272,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 2009 of $50,000. Au Sable is an accrual basis taxpayer. The corporation's current earnings and profits for 2010 would be
Question 4: Tammy owns 100 shares in Star Struck Corporation. The other 100 shares are owned by her husband Tommy. Which of the following statements is true?
Question 5: Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?
Part II:
Q1. A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. Thecorporation makes a $600 distribution to its sole shareholder. Which of thefollowing statements is true?
A. Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution.
B. $500 of the distribution will be a dividend because total earnings and profits is $500.
C. $0 of the distribution will be a dividend because current earnings and profits is negative.
D. $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000.
Q2. Tammy owns 100 shares in Star StruckCorporation. The other 100 shares are owned by her husband Tommy. Which of thefollowing statements is true?
A. A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as a dividend if Tammy waives the family attribution rules and files a "triple i" agreement with the IRS.
B. A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as an exchange for tax purposes.
C. A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as a dividend for tax purposes.
D. A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as an exchange if Tammy waives the family attribution rules and files a "triple i" agreement with the IRS.
Q3. Which of the following individuals is notconsidered "family" for purposes of applying the stock attributionrules to a stock redemption?
A. Spouse
B. Parents
C. Grandchildren
D. Grandparents