Malcomb and Sandra (Shareholders) Each Loan Crow Corporation $50,000 at the Market

question 98

Multiple Choice

Malcomb and Sandra (shareholders) each loan Crow Corporation $50,000 at the market rate of 6% interest. Which of the following statements are false?

• A)Crow may deduct the interest expense, and the interest income is taxable to Malcomb and Sandra.
• B)When the note principal is repaid, neither Malcomb nor Sandra recognizes gross income from the repayment.
• C)If the IRS were successful in reclassifying the notes as equity, the interest payments would not be deductible by Crow, and Malcomb and Sandra would still recognize income.
• D)If the IRS were successful in reclassifying the notes as equity, repayment of the note principal to Malcomb and Sandra would not qualify for return of capital treatment and would most likely result in dividend income treatment for Malcomb and Sandra.
• E)All of the above are true.

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Definitions:

Role Conflict

A situation where competing demands are made on an individual in the context of their various social roles, causing stress or tension.

Backstage Setting

describes a private area where individuals can freely express themselves without adhering to the social roles and norms expected in public (frontstage) settings.

Impression Management

The process by which individuals attempt to control the perception or impression of themselves in the minds of others, often through social interaction.

Role Performance

Is the act of expressing a socially defined role through behavior, in accordance with societal expectations.