What Is the Effect on the AAA If an S

question 21

Multiple Choice

What is the effect on the AAA if an S corporation distributes a piece of property valued at $10,000 with a $5,000 basis to 50 percent shareholder and $10,000 cash to the other 50 percent shareholder in a nonliquidating distribution?

• A)$10,000 net increase
• B)$5,000 net increase
• C)$15,000 net decrease
• D)$20,000 net decrease

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Definitions:

Capital Cost Allowance

A tax deduction in Canada that allows businesses to write off the cost of physical assets over time.

Canadian Tax Law

The laws and regulations that define how taxes are calculated, collected, and enforced in Canada, covering income, corporate, sales taxes, and more.

Depreciation Method

An accounting technique used to allocate the cost of a tangible asset over its useful life.

Stand-Alone Principle

A method in capital budgeting where a project is evaluated based on its own profitability without considering the impact of other projects or financing methods.