Question: 1. List the four basic adjustments that a corporation makes to taxable income or net loss to compute current E&P. What is the rationale for making these adjustments?
2. Amy is the sole shareholder of a corporation. Rather than have the corporation pay her a dividend, Amy decides to have the corporation declare a "bonus" at year-end and pay her tax-deductible compensation. How does this effect Amy's taxes and the corporation's taxes?
3. Why would a corporation issue a stock dividend to its shareholders instead of a cash dividend?
4. What effect does a nontaxable stock dividend create for a shareholder?
5. What would cause a stock dividend to be taxable to the recipient?
6. What stock ownership tests must be met before a shareholder receives exchange treatment under the substantially disproportionate change-in-stock-ownership test in a stock redemption? Why is a change in stock ownership test used to determine the tax status of a stock redemption?
7. What are the criteria to meet the "not essentially equivalent to a dividend" change-in-stock-ownership test in a stock redemption?
8. Which members of a family are included in the family attribution rules? Is there any rationale for the family members included in the test?
9. Is there anything a shareholder can do to waive the family attribution rules in a complete redemption of stock?
10. Does a corporation's computation of earnings and profits resulting from a distribution differ based on the tax treatment of a stock redemption to the shareholder (that is, as either a dividend or exchange)?