Even Though an S Corporation Was Formerly a C Corporation

question 37

True/False

Even though an S corporation was formerly a C corporation, all of its cash distributions can be confidently treated as nontaxable if there is no AEP from its C corporation years and the distribution does not exceed the shareholder's basis in the S stock.

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Definitions:

Bond Stripping

Selling bond cash flows (either coupon or principal payments) as stand-alone zero-coupon securities.

Arbitrage

The method of earning profits by exploiting the price variances of an identical asset across diverse markets through concurrent purchase and sale.

Law of One Price

The economic theory that states that the price of an identical asset or commodity will have the same price globally when price differences account for exchange rates.

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures, incorporating both interest payments received and any gain or loss if the bond is bought at a discount or premium to its face value.