Keisha Owns 100% of DEF Company and Has a Basis

question 22

Multiple Choice

Keisha owns 100% of DEF Company and has a basis of $10,000 in its stock.DEF has earnings and profits of $9,000 and distributes a cash dividend to Keisha of $12,000.Keisha has a:

• A)Capital gain of $2,000.
• B)Dividend of $12,000.
• C)Nontaxable distribution of $1,000.
• D)Nontaxable distribution of $3,000.

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Definitions:

Manager Responsibility

The obligation of managers to plan, control, and make decisions that align with the strategic objectives and financial performance of the organization.

Transfer Pricing

Pricing transactions internally within a company, especially across borders, for goods, services, or use of property between related entities.

Profit Centres

Profit centres are separate business units or departments within a company that are responsible for generating their own revenue and profit, evaluated on their financial performance.

Controllable Costs

Expenses that can be directly influenced or managed by a specific level of management or decision maker within a given timeframe.