Which of the Following Statements Is Incorrect

question 116

Multiple Choice

Which of the following statements is incorrect?

• A)A distribution of appreciated property creates a gain to the corporation.
• B)A distribution from earnings and profits in excess of stockholder basis is a nontaxable return of capital.
• C)Distributions paid in excess of earnings and profits are nontaxable to the extent of stockholder basis.
• D)Earnings and profits are conceptually similar to retained earnings.

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Definitions:

Form 1099-INT

A tax form used to report interest income from banks, brokerage firms, and other financial institutions during the tax year.

Form 1040EZ

A simplified federal income tax form for individual taxpayers with straightforward tax situations, no longer in use after the 2018 tax year.

Income Tax Withholding

The process by which employers deduct a portion of employees' wages to pay directly to the government as prepayment for the employees' income tax liabilities.

Tax Liability

The total amount of tax owed by an individual, corporation, or other entity to a taxing authority, after deductions, credits, and exemptions.