Roy Receives a Nonliquidating Distribution from Ageless Corporation

question 23

Multiple Choice

Roy receives a nonliquidating distribution from Ageless Corporation. Which of the following statements concerning nonliquidating distributions from a corporation are correct?
I.A nonliquidating cash distribution is taxable if the distribution comes from the corporation's current or accumulated earnings and profits.
II.The amount of the dividend on a nonliquidating distribution of property is the basis of the property distributed.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Free Cash Flow

The amount of cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.

Capital Expenditures

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment.

Cash Dividends

Payments made out of a corporation's earnings to its shareholders, typically in the form of cash.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments not considered cash equivalents.