Multiple choice

1) Boxer Corporation buys equipment in January of the current year with a 7-year class life for $15,000. The corporation expensed the $15,000 under Sec. 179. The deduction in the year of purchase for E&P purposes due to the acquisition and expensing of the equipment is

A. $3,000 

B. $14,000 

C. $15,000 

D. $1,500 

2) Identify which of the following statements is false.

A. The function of E&P is to provide a measure of a corporation's economic ability to pay dividends. 

B. At formation, a corporation's E&P depends on the amount of capital contributed by the shareholders. 

C. Adjustments to taxable income when computing E&P do not include tax exempt interest. 

D. For E&P dividend distribution purposes, property as defined in Sec. 317(a) includes money. 

3) Identify which of the following statements is true.

A. Section 179 property must be expensed ratably over a 5-year period when computing E&P. 

B. Losses on property sales to related parties are not deductible when computing E&P. 

C. Distributions made out of accumulated E&P are allocated ratably between multiple distributions made during the tax year. 

D. All are false. 

4) Current E&P does not include

A. tax-exempt interest income 

B. life insurance proceeds where the corporation is the beneficiary 

C. federal income tax refunds from prior years 

D. All of the these are included