A nonliquidating Free live sex chat with online nigerian girls

the partnership's bases in the distributed property B. The equipment is being depreciated using the 5 year MACRS schedule. bad debts44) The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to A. Pantaloon is leasing its current building for 4 per year. For 2011, Locke had current earnings\r\nand profits of ,000 and made two ,000 cash distributions\r\nto its shareholders, one in April and one in September\r\nof 2011. This property, which had an adjusted \r\nbasis of ,000 and a fair market value of ,000 at\r\ndate of distribution, did not constitute assets used in the active\r\nconduct of Tour\u2019s business. Sunny\u2019s basis in the property distributed is 0.\r\n\r\n Under \u00a7311(b)(1), Sunny Corporation reports a gain of 0 on the distribution (0 FMV - 0 AB).\r\n\r\n Determining the Dividend \r\n\r\n Example 2\r\n\r\n\t Cher Holder receives a property distribution from Sunny Corporation with a fair value of 0. On January 1, 2011, Locke Corp., an accrual-basis,\r\ncalendar-year C corporation, had ,000 in accumulated\r\nearnings and profits. Tour Corp., which had earnings and profits of\r\n0,000, made a nonliquidating distribution of property to\r\nits shareholders in 2012. Cher assumes a 0 mortgage attached to the property.Learning Objectives\r\n\r\n Explain the basic tax law framework that applies to property distributions from a corporation to a shareholder\r\n\r\n Compute a corporation\u2019s earnings and profits and calculate the dividend amount received by a shareholder\r\n\r\n Identify situations in which a corporation may be deemed to have paid a \u201cconstructive dividend\u201d to a shareholder\r\n\r\n Comprehend the basic tax rules that apply to stock dividends\r\n\r\n Learning Objectives\r\n\r\n Comprehend the different tax consequences that can arise from stock redemptions\r\n\r\n Contrast a partial liquidation with other types of stock redemptions and describe the difference in tax consequences to the shareholders\r\n\r\n Framework for Property Distributions\r\n\r\n Corporations cannot deduct dividend distributions and this creates the \u201cdouble taxation\u201d of the corporation\u2019s income.\r\n Distributions to shareholders generally receive preferential tax treatment:\r\n Dividends must be included in gross income (albeit generally taxed at a lower tax rate).\r\n Distributions may result in a tax-free return of capital.\r\n Distributions may result in capital gains.\r\n\r\n Framework for Property Distributions\r\n\r\n Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent).\r\n\r\n If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible.\r\n\r\n Constructive Dividends\r\n\r\n Examples of disguised (constructive) dividends \u2013 \r\n\r\n Unreasonable compensation\r\n\r\n Bargain sales of property to shareholders\r\n\r\n Shareholder use of corporate assets without an arm\u2019s-length payment\r\n\r\n Loans from shareholders at excessive interest rates\r\n\r\n Corporate payments of the shareholder\u2019s personal expenses\r\n\t\r\n\r\n Constructive Dividend\r\n\r\n90. At the beginning of the year, Westwind, a C corporation,\r\nhad a deficit of ,000 in accumulated earnings and\r\nprofits. On the date of the distribution,\r\nthe following data were available:\r\n\t Adjusted basis of land \t\t$ 6,500\r\n\t Fair market value of land \t 14,000\r\n\t Mortgage on land \t\t 5,000\r\n For the year ended December 31, 2011, Gelt had earnings\r\nand profits of ,000 without regard to the dividend distribution.\r\n If the mortgage on the land was assumed by the sole\r\nshareholder, by how much should the dividend distribution\r\nreduce Gelt\u2019s earnings and profits? After the distribution of the preferred stock, Joan\u2019s bases\r\nfor her Orban stocks are\r\n Common \t Preferred\r\na. 5 \t $ 75\t\t PS = (0\/0) x 0 = \r\nc. December 2012.\r\n\r\n Stock Redemptions\r\n\r\n Form of a Stock Redemption\r\n A redemption occurs when a corporation acquires its stock from a shareholder in exchange for property\r\n It does not matter if the acquired stock is canceled, retired, or held as treasury stock.\r\n A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.\r\n Individuals prefer exchange treatment because of the ability to recover their stock basis.\r\n\r\n Corporate shareholders prefer dividend treatment because of the dividends received deduction.\r\n\r\n Three types of redemptions are treated as exchanges by determining the effect of the redemption on the redeemed shareholder:\r\n Redemptions that are Substantially Disproportionate are treated as sales.\r\n Redemptions in Complete Redemption of all of the Stock of the Corporation Owned by the Shareholder\r\n Redemptions that are not Essentially Equivalent to a Dividend\r\n\r\n\r\n Stock Redemptions\r\n\r\n Stock Redemption\r\n\r\n92.On June 30, 2011, Ral Corporation had earnings\r\nand profits of 0,000. For the current year, Westwind reported earnings\r\nand profits of ,000. What was the amount of Westwind\u2019s accumulated\r\nearnings and profits deficit at year-end? 0 \t 0\t\t CS = (0\/0) x 0 = 5\r\nd. Two unrelated individuals, Mark and David, each own\r\n50% of the stock of Pike Corporation, which has accumulated\r\nearnings and profits of 0,000. 0,000 dividend.\r\n\r\n Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

a nonliquidating-31a nonliquidating-2

Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of 0,000 and a fair market value of 0,000 to Reed, its sole shareholder. AE&P as of July 1 =

Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.

The basis of the property received is fair market value.

Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.The basis of the property received is fair market value. Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000. If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

M  ½(

Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.

The basis of the property received is fair market value.

Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.The basis of the property received is fair market value. Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000. If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

M) = 0,000^ 0,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.

The basis of the property received is fair market value.

Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for ,000.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 0,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87.

Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of 0,000 and a fair market value of 0,000 to Reed, its sole shareholder. AE&P as of July 1 =

Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.

The basis of the property received is fair market value.

Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.The basis of the property received is fair market value. Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000. If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

M  ½(

Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.

The basis of the property received is fair market value.

Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.The basis of the property received is fair market value. Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000. If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

M) = 0,000^ 0,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.

The basis of the property received is fair market value.

Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for ,000.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 0,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. [[

Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.

The basis of the property received is fair market value.

Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000.

If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.

Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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Distributions may result in a tax-free return of capital. Framework for Property Distributions Payments to shareholders are deductible by the corporation if the payment relates to services provided by the shareholder (such as salary, bonus, interest, or rent). In 2011, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. AE&P as of July 1 = $1M  ½($1M) = $500,000^ $500,000 is a treated as a dividend to the extent of the AE&P that is available to pay out on the date of distribution. A redemption may result in a dividend to the shareholder or may be treated as a sale or exchange of the redeemed shares if certain requirements are met.The basis of the property received is fair market value. Stock Redemptions Stock Redemptions Tax Consequences to the Distributing Corporation If the redemption is a dividend, then E&P is reduced by the cash and fair market value of other property distributed. Spartan redeems all of Shareholder A’s stock on July 1 for $80,000. If these payments are unreasonable, then the unreasonable (excessive) portion may be treated as a constructive dividend and the payment is no longer deductible. $(57,000) Ordering of E&P Distributions Positive Current E&P and Positive Accumulated E&P Positive current E&P, negative accumulated E&P Negative current E&P, positive accumulated E&P Negative current E&P, negative accumulated E&P Determining the Dividend Taxable dividend 85. The following information pertains to Kent: Reed’s basis in Kent stock at January 1, 2011 $500,000 Accumulated earnings and profits at January 1, 2011 125,000 Current earnings and profits for 2011 60,000 What was taxable as dividend income to Reed for 2011? ^ E&P should be apportioned on a daily basis, but for our purposes you can use months. Individuals prefer exchange treatment because of the ability to recover their stock basis. Stock ownership tests must be met for treatment as substantially disproportionate under Sec.Constructive Dividends Examples of disguised (constructive) dividends – Unreasonable compensation Bargain sales of property to shareholders Shareholder use of corporate assets without an arm’s-length payment Loans from shareholders at excessive interest rates Corporate payments of the shareholder’s personal expenses Constructive Dividend 90. Determining the Dividend Tax Consequences to a Corporation Paying Noncash Property as a Dividend The corporation recognizes gains (but not losses) on the distribution of noncash property as a dividend Gain is recognized to the extent of fair market value in excess of tax basis in the property Liabilities If the property’s fair market value is less than liabilities assumed by the shareholder, the fair market value is deemed to be the liability Determining the Dividend Loss Recognition 87. $0 Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of $200. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

]] Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of 0. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

Example 1 Cher Holder receives a property distribution from Sunny Corporation with a fair value of 0. Corporate shareholders prefer dividend treatment because of the dividends received deduction. 302(b)(2): The shareholder owns less than 50 percent of the voting power immediately after the exchange The shareholder’s percentage of voting stock and aggregate value after the redemption is less than 80 percent of the percentage before the redemption In computing the percentage ownership tests, constructive ownership rules under Sec.

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