Reference no: EM131037618

1. Compare the tax consequences to the shareholder and the distributing corporation of the following three kinds of corporate distributions: ordinary dividends, stock -redemptions, and complete liquidations.

2. Please complete the following paragraphs:

Ordinary dividend distributions require the distributing corporation to recognize ____________ (gain/loss/gains but no loss/loss but no gains) when distributing noncash property as a dividend.

The shareholder reports _____________________________________________when the distribution comes from earnings and profits (E&P).

Stock redemptions require the distributing corporation to recognize _______________________ (gain/loss/gains but no loss/loss but no gains) when distributing noncash property.

The shareholder reports ___________________________________________.

Complete liquidations require the distributing corporation to recognize _____________________ (gain/loss/gains but no loss/loss but no gains) when distributing noncash property unless one of a series of limited exceptions applies to loss recognition.

The shareholder reports ______________________________________.

3. Comparison of Dividends and Redemptions. Bailey is one of four equal unrelated. Shareholders of Checker Corporation. Bailey has held Checker stock for four years and. has a basis in her stock of $40,000. Checker has $280,000 of current and accumulated E&P and distributes $100,000 to Bailey.

a. What are the tax consequences to Checker and to Bailey if Bailey is an individual and the distribution is treated as a dividend?

b. In Part a, what would be the tax consequences if Bailey were a corporation?

c. What are the tax consequences to Checker and to Bailey (an individual) if Bailey surrenders all her stock in a redemption qualifying for sale treatment?

d. In part c, what would be the tax consequences if Bailey were a corporation?

e. Which treatment would Bailey prefer if Baily were an individual? Which treatment would Bailey Corporation Prefer?

(a)

• Bailey recognizes a dividend of $_________ subject to the ______% tax rate.

• Bailey ________ (will/will not) be entitled to an 80% dividends-received deduction.

• Checker Corporation _________ (increases/decreases) its E&P by $_________.

(b)

• If Bailey was a corporation it will record a dividend of $________.

• Bailey ________ (will/will not) be entitled to an 80% dividends-received deduction.

• Checker _________ (increases/decreases) its E&P by $__________.

(c)

• If Bailey is an individual, he will recognize a long-term capital ___________ (gain/loss) of $________.

• Checker _________ (increases/decreases) its E&P by $__________ because she surrendered 25% of the outstanding stock in a redemption qualifying as a sale.

(d)

• If Bailey is a corporation, it will recognize a long-term capital ___________ (gain/loss) of $________ per Section _________.

• Checker _________ (increases/decreases) its E&P by $__________.

(e) Please write in essay format.