Which of the following statements is incorrect? Earnings and profits are conceptually similar to retained earnings. A distribution from earnings and profits in excess of stockholder basis is a nontaxable return of capital. A distribution of appreciated property creates a gain to the corporation. Distributions paid in excess of earnings and profits are nontaxable to the extent of stockholder basis.

The dividend can be paid either from current earnings and profits or from the accumulated earnings and profits. For the purpose of dividends, the total earnings and profits must be positive distribution.Answer b is Incorrect option A distribution from earnings and profits in excess of stockholder basis is a non-taxable return of capital. Reason: A distribution is considered to be a return of capital to shareholders when it is in excess of the total earnings and profits.

Answered: Earnings and profits are conceptually…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Which of the following statements is incorrect?

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

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions