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When a corporation makes an installment sale, for E & P purposes the realized gain is recognized in the year of sale.

A) True
B) False

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The terms "earnings and profits" and "retained earnings" are identical in meaning.

A) True
B) False

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Use of MACRS cost recovery when computing taxable income does not require an E & P adjustment.

A) True
B) False

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In June of the current year, Marigold Corporation declares a $4 dividend out of E & P on each share of common stock to shareholders of record on August 1.Ellen and Tim each purchase 100 shares of Marigold stock on July 1.On July 15, Ellen also purchases a short position in Marigold.Tim sells 50 of his shares on August 10 and continues to hold the remaining 50 shares through the end of the year.Ellen closes her short position in Marigold on October 15.With respect to the dividends, which of the following is correct?


A) Ellen will have $400 of qualifying dividends subject to reduced tax rates and $400 of ordinary income (from dividends paid on the short position of Marigold stock) .
B) Tim will have $200 of qualifying dividends subject to reduced tax rates and $200 of ordinary income.
C) All $800 of Ellen's dividends will qualify for reduced tax rates.
D) All $400 of Tim's dividends will qualify for reduced tax rates.
E) None of the above.

F) C) and D)
G) A) and D)

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Which of the following is an incorrect statement regarding the application of the § 318 stock attribution rules?


A) An individual is not deemed to own the shares owned by his or her siblings.
B) Stock owned by an estate is deemed to be owned in full by a beneficiary.
C) Stock owned by any shareholder owning 50% or more of a corporation's stock is deemed to be owned in full by the corporation.
D) Stock owned by a partnership is deemed to be owned proportionately by a partner.
E) None of the above.

F) A) and E)
G) All of the above

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