Fernando Was a One-Third Shareholder in Rodriguez, Inc
Fernando was a one-third shareholder in Rodriguez, Inc. prior to its liquidation in March. Fernando's basis in his Rodriguez stock was $50,000. In March, Rodriguez distributed property worth $125,000 (basis $80,000) in complete liquidation of Fernando's Rodriguez shares. Fernando took the property subject to a $30,000 liability. How much taxable gain must Fernando recognize upon receipt of the property from Rodriguez?
A sole shareholder receives a piece of land from a corporation as a dividend distribution. The land has a basis of $40,000 and a fair market value of $80,000; the shareholder's basis in his stock is $20,000, and this distribution is the only corporate activity for the year except for paying any tax owed on the land distribution. At the beginning of the year, the corporation had only $5,000 in accumulated earnings and profits. How will this distribution be treated for tax purposes by the shareholder?
A) $80,000 dividend
B) $39,000 dividend; $41,000 capital gain
C) $36,600 dividend; $20,000 return of capital; $23,400 capital gain
D) $60,000 dividend; $20,000 return of capital
Tom owns 60 percent of CDF Corporation. CDF rents a building from Tom for $4,500 per month. Fair rental value for the building is only $3,000 per month. In addition, CDF employs Tom's son as the general manager at a salary of $350,000 annually. Similar positions in similar businesses pay $200,000 annually. How much rental and dividend income should Tom report on his tax return for the year?
A) $54,000 rental income
B) $54,000 rental income; $150,000 dividend income
C) $36,000 rental income; $18,000 dividend income
D) $36,000 rental income; $168,000 dividend income
A corporation owns 90 percent of the voting power of a second corporation but only 70 percent of its total stock value. The corporations are:
B) A controlled group
C) Brother-sister corporations
D) Consolidated group