If the IRS Reclassifies Debt as Equity Under § 385,the

question 125

True/False

If the IRS reclassifies debt as equity under § 385,the repayment of the debt by the corporation to the shareholder is treated as a dividend,assuming adequate E & P.

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Definitions:

Inductive Reasoning

A logical process in which multiple premises, all believed true or found true most of the time, are combined to obtain a specific conclusion.

Deductive Reasoning

A logical process in which a conclusion follows necessarily from the stated premises; inference from general to specific.

Inductive Reasoning

A method of reasoning in which specific observations or examples are used to form a general conclusion or principle.

Hypothetical Thinking

The process of exploring and considering possibilities or outcomes that do not currently exist or have not yet occurred.