Question

QUESTION 7 A corporation sells property (basis of $175,000) to its sole shareholder for $125,000, the fair market value of the property. With respect to the sale, The shareholder has a basis of S175,000 in the property. The corporation has a tax loss of S50,000. The corporation does not recognize a tax loss but reduces its E & P account $50,000. The shareholder has a constructive dividend of $50,000. None of the above QUESTION 8 Assume taxable income is the starting point for computing E & P. During 2010, Sagittarius Corporation had a capital loss of S60,000 and a capital gain of S30,000. The net capital loss of S30,000 could not be deducted in arriving at Sagittarius's taxable income for 2010. The $30,000 was carried over to 2011 and fully deducted in that year. The excess capital loss has no effect on Sagittarius Corporation's E&P in 2011 The excess capital loss reduces Sagittarius Corporation's E &P for 2011. The excess capital loss of $30,000 would reduce Sagittarius Corporation's E & P in 2010. The excess capital loss increases Sagittarius Corporation's E &P for 2010 None of the above.

Answer 1

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