Chapter 18 Key Terms

Pregunta	Respuesta
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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