Which of the Following Is a False Statement Regarding Transactions

question 20

Multiple Choice

Which of the following is a false statement regarding transactions between corporations and their shareholders?

• A)Corporations are not allowed to deduct a loss incurred in a transaction between related parties.
• B)A shareholder owning 50 percent of a corporation's outstanding stock is a related party according to the general rule.
• C)In the case of a personal service corporation, any employer-owner that owns any of the corporation's stock is a related party under certain conditions.
• D)The sale of property at a gain between a corporation and its controlling shareholders is not affected by the related parties rules.

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Definitions:

Without Substantial Change

This entails maintaining the primary essence or core of something while possibly making minimal adjustments that do not significantly alter its nature or function.

Negligence

A failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances, resulting in harm or damage.

Misrepresentation

A false statement of fact by one party to another party, which induces that other party to enter into a contract.

Strict Liability in Tort

A legal doctrine that holds individuals or entities responsible for damages or harm, irrespective of fault or intent.