Multiple choice

1) Joshua owns 100% of Steeler Corporation's stock. Joshua's basis in the stock is $8,000. Steeler Corporation has E&P of $40,000. If Steeler Corporation redeems 60% of Joshua's stock for $50,000, Joshua must report dividend income of

A. $8,000 

B. $50,000 

C. $40,000 

D. $0 

2) Elijah owns 20% of Park Corporation's single class of stock. Elijah's basis in the stock is $8,000. Park's E&P is $28,000. If Park redeems all of Elijah's stock for $48,000, Elijah must report dividend income of

A. $28,000 

B. $48,000 

C. $40,000 

D. $0 

3) Which of the following is not a reason for a stock redemption?

A. desire by shareholders to reduce the corporate tax liability 

B. No outside market exists for the stock. 

C. Redemption of shares is a good corporate investment. 

D. desire by remaining shareholders to retain control 

4) Identify which of the following statements is true.

A. The S corporation rules were enacted to allow small corporations to enjoy the nontax advantages of the corporate form of business without being subject to the tax disadvantage of double taxation. 

B. A partnership can elect to be taxed as a corporation under the check-the-box regulations. As a corporation, an S election can be made. 

C. For C corporations that desire to be taxed like a partnership, the S corporation rules provide a practical alternative for an existing C corporation to obtain many of the tax benefits of being taxed as a partnership. 

D. All are true.