Chapter 18 Key Terms

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Corporate Taxation: Nonliquidating Distributions
Kalie Carney
Flashcards by Kalie Carney, updated more than 1 year ago
Kalie Carney
Created by Kalie Carney over 1 year ago
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Question Answer
Accumulated earnings and profits Undistributed earnings and profits from years prior to the current year.
Bright-line test Technical rules found in the tax law that provide the taxpayer with objective tests to determine the tax consequences of a transaction.
Constructive ownership Rules that cause stock not owned by a taxpayer to be treated as beneficially owned by the taxpayer for purposes of meeting certain stock ownership tests.
Current earnings and profits A year-to-year calculation maintained by a corporation to determine if a distribution is a dividend. Earnings and profits are computed for the current year by adjusting taxable income to make it more closely resemble economic income.
Dividend A distribution to shareholders of money or property from the corporation’s earnings and profits.
Partial liquidation A distribution made by a corporation to shareholders that results from a contraction of the corporation’s activities.
Stock redemption A property distribution made to shareholders in ­return for some or all of their stock in the distributing corporation that is not in partial or complete liquidation of the corporation.
Stock split A stock redemption in which a corporation exchanges a ­ratio of shares of stock (e.g., 2 for 1) for each share held by the ­shareholder.
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