Which of the Following Statements Is True

question 26

Multiple Choice

Which of the following statements is true?

• A)All stock redemptions are treated as exchanges for tax purposes.
• B)A stock redemption not treated as an exchange will automatically be treated as a taxable dividend.
• C)All stock redemptions are treated as dividends if received by an individual.
• D)A stock redemption is treated as an exchange only if it meets one of three stock ownership tests described in the Internal Revenue Code.

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Definitions:

Unearned Rent Revenue

Liability account that reflects payments received for rent before the rental period has occurred; it is recognized as revenue over time as the service is provided.

Rent Expense

The cost incurred by a business to utilize property as an office, manufacturing space, storage, or retail location.

Prepaid Rent Expense

An asset account that shows the amount of rent paid in advance, which has not yet been consumed or used.

Freight-In

The cost associated with transporting goods into a facility, usually included in the inventory cost of the goods purchased.