Which of the Following Is an Incorrect Statement Regarding the Tax

question 32

Multiple Choice

Which of the following is an incorrect statement regarding the tax consequences of a § 306 stock disposition?

• A)In a sale of § 306 stock, the shareholder generally recognizes ordinary income equal to the fair market value of the preferred stock on the date it was acquired in the stock dividend.
• B)No loss is recognized on a sale of § 306 stock.
• C)The issuing corporation's E & P is not reduced by a sale of § 306 stock.
• D)In a redemption of § 306 stock, the shareholder generally recognizes dividend income equal to the amount of the redemption proceeds.
• E)None of the above.

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Definitions:

Token Economy

A behavioral management system in which individuals earn tokens for exhibiting desirable behavior, which can be exchanged for rewards.

Light Exposure Therapy

A treatment method used primarily for seasonal affective disorder (SAD) and certain sleep disorders, involving exposure to artificial light.

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A mood disorder characterized by persistent feelings of sadness, hopelessness, and a lack of interest or pleasure in activities.

Bulimia

An eating disorder characterized by episodes of binge eating followed by compensatory behaviors, such as vomiting or excessive exercise, to prevent weight gain.