Question

What special restrictions apply to the deduction of a loss realized on the sale of property between a corporation and a shareholder who owns​ 60% of the​ corporation's stock? What restrictions apply to the deduction of expenses accrued by a corporation at​ year-end and owed to a cash method shareholder who owns​ 60% of the​ corporation's stock?

What special restrictions apply to the deduction of a loss realized on the sale of property between a corporation and a shareholder who owns​ 60% of the​ corporation's stock?

A.

The deduction of the loss may only offset net active income for losses realized on the sale or exchange of property between a corporation and a shareholder who owns more than​ 50% of the​ corporation's stock. Any remaining loss can be carried forward and used at a later date to reduce his or her recognized gain on a subsequent sale or exchange of the property.

B.

The deduction of the loss may only offset net active income for losses realized on the sale or exchange of property between a corporation and a shareholder who owns more than​ 50% of the​ corporation's stock. Any remaining loss can be carried forward and used at a later date to reduce his or her recognized gain on a subsequent sale or exchange of property of the same asset class.

C.

The deduction of the loss is denied for losses realized on the sale or exchange of property between a corporation and a shareholder who owns more than​ 50% of the​ corporation's stock. The purchasing party can use the loss at a later date to reduce his or her recognized gain on a subsequent sale or exchange of property of the same asset class.

D.

The deduction of the loss is denied for losses realized on the sale or exchange of property between a corporation and a shareholder who owns more than​ 50% of the​ corporation's stock. The purchasing party can use the loss at a later date to reduce his or her recognized gain on a subsequent sale or exchange of the property.

What restrictions apply to the deduction of expenses accrued by a corporation at​ year-end and owed to a cash method shareholder who owns​ 60% of the​ corporation's stock?

A.

The deduction is denied for accrued expenses involving a corporation and a controlling shareholder that use different accounting methods when the payee will include the item in gross income at a date that is later than when it is accrued by the payor. The payor deducts the expense at the time the payee includes it in gross income.

B.

The deduction is limited for accrued expenses involving a corporation and a controlling shareholder that use different accounting methods when the payee will include the item in gross income at a date that is later than when it is accrued by the payor. The payor must deduct at least half of the expenses at the time the payee includes it in gross income.

C.

The deduction is denied for accrued expenses involving a corporation and a controlling shareholder that use different accounting methods when the payor will accrue an item at a date that is later than when the payee will include the item in gross income. The payor deducts the expense at the time the payee includes it in gross income.

D.

The deduction is limited for accrued expenses involving a corporation and a controlling shareholder that use different accounting methods when the payor will accrue an item at a date that is later than when the payee will include the item in gross income. The payor must deduct at least half of the expenses at the same time the payee includes the item in gross income.

Answer 1

What special restrictions apply to the deduction of a loss realized on the sale of property between a corporation and a shareholder who owns​ 60% of the​ corporation's stock?

D.

The deduction of the loss is denied for losses realized on the sale or exchange of property between a corporation and a shareholder who owns more than​ 50% of the​ corporation's stock. The purchasing party can use the loss at a later date to reduce his or her recognized gain on a subsequent sale or exchange of the property.

What restrictions apply to the deduction of expenses accrued by a corporation at​ year-end and owed to a cash method shareholder who owns​ 60% of the​ corporation's stock?

A.

The deduction is denied for accrued expenses involving a corporation and a controlling shareholder that use different accounting methods when the payee will include the item in gross income at a date that is later than when it is accrued by the payor. The payor deducts the expense at the time the payee includes it in gross income.