All of the Following Distributions of Stock Dividends Are Taxable

question 13

Multiple Choice

All of the following distributions of stock dividends are taxable except:

• A) fte shareholders have the choice to receive cash or other property instead of stock or stock rights.
• B) fte distribution of common stock is made on a prorated basis on common stock outstanding.
• C) fte distribution gives cash or other property to some shareholders and an increase in the percentage interest in the corporation's assets or earnings and profits to other shareholders.
• D) fte distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders.

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Definitions:

Ratify

To formally approve or confirm an agreement or action, making it officially valid.

Disaffirms

To legally reject or void a contract or agreement, especially one entered into by minors or under conditions that invalidate consent.

Disaffirmance

The legal right of a minor to void contracts or agreements entered into, under specific conditions.

Contractual Capacity

The legal ability of a person or entity to enter into a contract.