Hogg Corporation Distributes $30,000 to Its Sole Shareholder, Ima

question 50

Multiple Choice

Hogg Corporation distributes $30,000 to its sole shareholder, Ima. At the time of the distribution, Hogg's E&P is $14,000 and Ima's basis in her stock is $10,000. Ima's gain from this transaction is a

• A)$6,000 capital gain.
• B)$14,000 capital gain.
• C)$20,000 capital gain.
• D)$30,000 capital gain.

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Definitions:

Indirect Method

The indirect method is a way of calculating cash flow from operating activities for the cash flow statement by adjusting net income for changes in non-cash accounts.

Operating Activities

The day-to-day actions that are involved in running a business, such as selling products, managing costs, and paying employees.

Depreciation Expense

The allocation of the cost of a tangible asset over its expected useful life to account for the loss of value over time.

Net Loss

This is the amount by which a company's total expenses exceed its total revenues, indicating that the business has spent more than it has earned during a specific period.