Dragon Corporation Reports a Distribution on Its Return from the Third

question 37

Multiple Choice

Dragon Corporation reports a distribution on its return from the third previous year as a stock redemption producing a capital gain. When the return is audited during the current year, the distribution of the third previous year is characterized by the IRS as a dividend. This change causes Dragon Corporation to be classified as a personal holding company for the third previous year. Which of the following statements is correct?

• A)Dragon Corporation will owe interest and/or underpayment penalty even if the PHC tax is avoided by a deficiency dividend.
• B)Dragon Corporation will owe no interest and/or underpayment penalty if the PHC tax is avoided by a deficiency dividend.
• C)A deficiency dividend is not permitted to be paid by Dragon.
• D)A dividend must be paid within 120 days of establishing the PHC tax liability and a claim for a dividends-paid deduction must be filed within 90 days of the determination date.

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Definitions:

Hormones

Chemical messengers produced by the endocrine glands that are released into the blood to affect target organs.

Emotional Outbursts

Sudden, extreme expressions of strong emotion that are often disproportionate to the situation at hand, sometimes resulting from stress, frustration, or other intense feelings.

Parkinson's Disease

A progressive neurological disorder characterized by motor symptoms such as tremors, rigidity, and bradykinesia, due to the loss of dopaminergic neurons.

Resting Potential

The voltage difference across the cell membrane of a neuron at rest, typically around -70mV.