1. Distributions by a corporation to its shareholders are presumed to be a dividend unless the parties can prove otherwise.
a. True
b. False
2. A distribution from a corporation will be taxable to the recipient shareholders only to the extent of the corporations E & P.
a. True
b. False
3. Distributions that are not dividends are a return of capital and decrease the shareholders basis.
a. True
b. False
4. Cash distributions received from a corporation with a positive balance in accumulated E & P at the beginning of the year will be taxed as dividend income.
a. True
b. False
5. A distribution in excess of E & P is treated as capital gain by shareholders.
a. True
b. False
6. The terms earnings and profits and retained earnings are identical in meaning.
a. True
b. False
7. To determine E & P, some (but not all) previously excluded income items are added back to taxable income.
a. True
b. False
8. When computing E & P, taxable income is not adjusted for § 179 expense.
a. True
b. False
9. When computing current E & P, taxable income must be adjusted for the deferred gain in a § 1031 likekind exchange.
a. True
b. False
10.An increase in the LIFO recapture amount must be added to taxable income to determine E & P.
a. True
b. False
11.Use of MACRS cost recovery when computing taxable income does not require an E & P adjustment.
a. True
b. False
12.No E & P adjustment is required for regular tax gains under the installment method.
a. True
b. False
13.A corporation borrows money to purchase State of Texas bonds. The interest on the loan has no impact on either taxable income or current E & P.
a. True
b. False
14.Federal income tax paid in the current year must be subtracted from taxable income to determine E & P.
a. True
b. False
15.To determine current E & P, taxable income must be increased for any domestic production activities deduction.
a. True
b. False
16.Nondeductible meal and entertainment expenses must be subtracted from taxable income to determine current E & P.
a. True
b. False
17.The dividends received deduction has no impact on E & P.
a. True
b. False
18.A realized gain from an involuntary conversion under § 1033 that is not recognized for income tax purposes has no effect on E & P.
a. True
b. False
