George Transfers Cash of $150,000 to Finch Corporation, a Newly

question 89

Multiple Choice

George transfers cash of $150,000 to Finch Corporation, a newly formed corporation, for 100% of the stock in Finch worth $80,000 and debt in the amount of $70,000, payable in equal annual installments of $7,000 plus interest at the rate of 9% per annum. In the first year of operation, Finch has net taxable income of $40,000. If Finch pays George interest of $6,300 and $7,000 principal payment on the note:

• A) George has dividend income of $13,300.
• B) Finch Corporation does not have a tax deduction with respect to the payment.
• C) George has dividend income of $7,000.
• D) Finch Corporation has an interest expense deduction of $6,300.
• E) None of the above.

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Definitions:

Population Mean

The average value of a characteristic in a population, representing the central tendency of the population data.

Confidence Interval

A confidence interval is a range of values, derived from sample statistics, that is likely to contain the value of an unknown population parameter at a given confidence level.

Variability

Describes the spread or dispersion of a set of data points within a dataset, indicating how much the data points differ from each other.

Population Standard Error

A measure of the estimation uncertainty in predicting a population parameter based on a sample statistic.