C Corp Shareholder Transactions Flashcards
(24 cards)
How do you calculate the recognized gain on a nonliquidating distribution of property to a shareholder in a C Corporation?
FMV - Adjusted basis = Recognized Gain
How is the tax basis for a C Corporation determined for contributed property in exchange for ownership?
The Greater of:
1) Adjusted net book value + any gain recognized
2) Debt assumed by the corporation
What makes a transfer of property to a C Corporation in exchange for stock a nontaxable event?
The shareholder (or shareholders) contributing the property must own at least 80% of the corporation
If the transfer of property to a C Corporation is a taxable event, what is the basis of that property to the corporation?
The FMV of the property
When a shareholder (or shareholders) contributes property to a corporation in exchange for stock and owns 80% or more of the stock, it is a nontaxable event unless…
The shareholder (or shareholders) receive boot
How is a shareholder’s basis in a C Corporation determined when contributing property in exchange for stock?
Adjusted basis of property - debt assumed by corporation = shareholder’s basis
What type of income are distributions from a C Corporation?
Dividend Income (Ordinary Income) to the extent of the C Corporation’s current or accumulated earnings and profits.
How is the taxable dividend amount to a shareholder determined?
- Extent of current earnings and profits (E&P)
- Any leftover distribution can use accumulated earnings and profits (E&P). If there is a negative E&P, then the dividend amount is just the current E&P.
How do you calculate a nontaxable return of capital in a distribution to a shareholder?
Distribution amount - current E&P amount = nontaxable return of capital
When a corporation makes multiple distributions in a tax year how are the current and accumulated E&Ps divied up?
Current E&P is allocated to each distribution on a pro rata basis
Accumulated E&P is applied in chronological order
How does the IRS reclassify a distribution of property to a shareholder that is under the FMV?
As a constructive dividend
Losses on the distribution of property are….
Not deductible
When distributing property to a shareholder, if the liability is greater than the FMV of the property, then…
The FMV is assumed to be the amount of the liability.
If the shareholder is an individual, the taxable amount of a property dividend from a corporation’s E&P is….
The FMV of the property
What happens in a corporate liquidation when a corporation directly distributes assets to its shareholders?
The corporation recognizes a gain or loss as if it had sold the assets at the FMV
The shareholders recognize dividend income in the amount of the fair market value of the property received.
What is the gain or loss recognized by a parent company who liquidates their subsidiary if they own more than 80% of subsidiary stock?
There is no gain or loss on this transaction.
How do you calculate the gain a corporation recognizes in a liquidating distribution?
FMV of assets - Corporation’s basis = Gain Recognized
True or False? A qualifying corporate reorganization is tax-free to all corporations involved.
True
True or False? Is a qualifying corporate reorganization is tax-free to all shareholders of the reorganized corporation?
True
What is a Tybe B reorganization?
Specific kind of tax-free corporate reorganization that involves the acquisition of the target corporation’s stock solely in exchange for the voting stock of the acquiring corporation
How much can married taxpayers deduct on a Section 1244 stock?
$100,000 in ordinary income and $3,000 in capital losses
If the 80% control test is met, what is the corporation’s basis in the property received for stock?
The basis the taxpayer had in the property before the date of distribution.
True or False? The stockholder does not have to be an original stockholder of the corporation in order to meet the standards necessary for the exclusion of gain on small business stock.
False, they do have to be an original stockholder
