Dragon Corporation Reports a Distribution on Its Return from the Third

question 37

Multiple Choice

Dragon Corporation reports a distribution on its return from the third previous year as a stock redemption producing a capital gain. When the return is audited during the current year, the distribution of the third previous year is characterized by the IRS as a dividend. This change causes Dragon Corporation to be classified as a personal holding company for the third previous year. Which of the following statements is correct?

• A)Dragon Corporation will owe interest and/or underpayment penalty even if the PHC tax is avoided by a deficiency dividend.
• B)Dragon Corporation will owe no interest and/or underpayment penalty if the PHC tax is avoided by a deficiency dividend.
• C)A deficiency dividend is not permitted to be paid by Dragon.
• D)A dividend must be paid within 120 days of establishing the PHC tax liability and a claim for a dividends-paid deduction must be filed within 90 days of the determination date.

---

Definitions:

Precontemplation Stage

A stage in behavior change models describing individuals not yet acknowledging a need for change.

Social Liberation

The process of achieving greater freedom or rights for a group within society, often related to overcoming oppression or discrimination.

Relapse

A return to substance use or problematic behavior after a period of abstinence or improvement.

Relapse Prevention

A cognitive-behavioral strategy aimed at teaching individuals who are recovering from addictive behaviors how to anticipate and cope with the potential for relapse.