Corporate Distributions to Shareholders That Represent a Nontaxable Return of Capital

question 122

Multiple Choice

Corporate distributions to shareholders that represent a nontaxable return of capital are those that are:

• A)made from current year's profit of the corporation.
• B)made from accumulated retained earnings of the corporation.
• C)made from the excess over earnings and profits of the corporation.
• D)made from the bank account of the corporation.

---

Definitions:

Principal Repaid

The portion of a loan payment that goes toward reducing the original loan amount, as opposed to the portion that goes toward paying interest.

Interest Paid

The amount paid over a period for borrowing money, typically expressed as an annual percentage rate.

Loan

A sum of money that is borrowed and is expected to be paid back with interest.

Asset's Market Value

The current price at which an asset can be bought or sold in a marketplace, reflecting the value assigned to it by the market participants.