4. Richmond Corporation is a calendar year taxpayer who hasaccumulated E& P coming into 2018 of $100,000. In the current year Richmond incurred a loss in current E& Pof $120,000 that is assumed to accrue ratably over the year. On August 31, 2018, Richmond distributes $120,000 in cash to Millie who is the sole shareholder. This is the only distribution made in 2018. Millie's basis in her Richmond shares prior to the distribution was $60,000. What taxable income will Millie recognize in 2018 as a result of the transaction? Dividend income of $20,000 Dividend income of $0 and capital gain income of $60,000. Dividend income of $120,000 Dividend income of $20,000 and capital gain income of $40,000 a. b. c. d. 5. Which of the following statements are correct with respect to determining E & P? Non-deductible meals and entertainment should be subtracted from taxable income. a. b. The dividend received deduction should be added back to taxable income C.Accounting methods used for determining E & P are generally more conservative than those allowed for calculating taxable income. All of the above. d. Bargain sales to shareholders produce constructive dividends equal to the difference between the property's basis and the amount paid by the shareholder 6. a. True b. False A distribution from a C-corporation will trigger a deemed taxable gain for the corporation only to the extent that the property distributed has a fair market value in excess of its tax basis 7. a. True b. False Napa Corporation (a C-Corporation) has two shareholders which are both also C- corporations. During the year Napa redeemed 20% of the shares outstanding from each shareholder. The distribution was the proceeds from the sale of one of two businesses that Napa had operated for greater than five years. The remaining business will be continued to be operated by Napa. This situation meets the requirements for a partial liquidation under the safe harbor rules, and therefore the distribution will be a qualified redemption. 8. a. True b. False