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:

Completed-Contract Method

This is an accounting method that recognizes revenues and expenses from a long-term contract only when the contract is completed.

Deferred Tax Liability

A tax obligation that is recorded on the balance sheet but not yet due, arising from temporary differences between the accounting and tax treatment of transactions.

Temporary Differences

Differences between the tax base of an asset or liability and its carrying amount in the financial statements, which will result in taxable or deductible amounts in the future.

Taxable Income

The amount of income used to calculate how much the entity owes in taxes to the federal, state, and/or local government.