Identify Which of the Following Statements Is True

question 57

Multiple Choice

Identify which of the following statements is true.

• A) Section 336 prevents recognition of a loss when making a pro rata distribution of property to a related person.
• B) A liquidating distribution of property other than a disqualified property that is made ratably to all shareholders (based on their stockholdings) will permit the recognition of loss on the portion of the distribution that is made to a related person.
• C) A subsidiary corporation can recognize losses on distributions to either the parent corporation or minority shareholders in a Sec. 332 liquidation.
• D) All of the above are false.

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Definitions:

Preferred Stock

A class of share capital that provides shareholders with a fixed dividend payment prior to any dividends being paid to common stockholders and typically does not confer voting rights.

Cost Computation

The process of calculating the total cost involved in manufacturing a product or providing a service.

Dividend Growth Model

A valuation method used to estimate the price of a company's stock by assuming that dividends grow at a constant rate in perpetuity.

Rate of Growth

The percentage increase in the size or value of something over a specific period.