Corporate Distributions to Shareholders That Represent a Nontaxable Return of Capital

question 122

Multiple Choice

Corporate distributions to shareholders that represent a nontaxable return of capital are those that are:

• A)made from current year's profit of the corporation.
• B)made from accumulated retained earnings of the corporation.
• C)made from the excess over earnings and profits of the corporation.
• D)made from the bank account of the corporation.

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Definitions:

Net Operating Income

A measure of a company's profitability that calculates how much revenue exceeds operating expenses, not including taxes and interest expenses.

Average Operating Assets

A financial metric calculated by averaging the beginning and ending values of assets employed in generating operating income over a certain period.

Minimum Required Rate

The lowest rate of return considered acceptable by investors for investing in a financial instrument, based on risk and alternative opportunities.

Average Operating Assets

An average value of the assets used in the regular operations of a business over a specific period.