Identify Which of the Following Statements Is True

question 42

Multiple Choice

Identify which of the following statements is true.

• A) A shareholder who receives a deficiency dividend must report the dividend as gross income for the tax year that includes the last day of the distributing corporation's tax year on which it was a PHC.
• B) A personal holding company's payment of a deficiency dividend eliminates its need to pay the personal holding company tax as well as any interest and underpayment penalties on the tax deficiency.
• C) A deficiency dividend is included in the shareholder's gross income for his/her tax year that includes the last day of the tax year in which the personal holding company claims a dividends- paid deduction.
• D) All of the above are false.

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Definitions:

Esterifies

The process by which an ester is formed, usually from the reaction between an acid and an alcohol with the elimination of water.

Hydrolyzes

Refers to the chemical process where water is used to break down a compound, often a polymer, into smaller units.

Organic Product

A compound produced through an organic reaction, typically consisting of carbon atoms in combination with hydrogen, oxygen, nitrogen, or other elements.

Ketone

Organic compounds featuring a carbonyl group (C=O) bonded to two carbon atoms, used in solvents and in the manufacture of various chemicals.