A calendar year corporation has substantial accumulated E & P, but it expects to incur a deficit in current E & P for the year due to significant losses in the last half of the year. A cash distribution to its shareholders on January 1 should result in a return of capital. Comment on the validity of this statement.
Answer to relevant QuestionsAt the beginning of the year, Penguin Corporation (a calendar year tax payer) has accumulated E & P of $55,000. During the year, Penguin incurs a $36,000 loss from operations that accrues ratably. On October 1, Penguin ...Your client, Heron Corporation, has a deficit in accumulated E & P of $300,000. Starting this year, it expects to generate annual E & P of$150,000 for the next four years and would like to distribute this amount to its share ...To qualify as a partial liquidation, a distribution must not be essentially equivalent to a dividend. Discuss how this requirement is satisfied. Explain the tax consequences to a shareholder of a corporation in the process of liquidation under the general rule of § 331. Indigo Corporation wants to transfer cash of $150,000 or property worth $150,000 to one of its shareholders, Linda, in a redemption transaction that will be treated as a qualifying stock redemption. If Indigo distributes ...
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