1. Non-liquidating distributions made by corporations to their shareholders are taxable to the shareholders-blank- only if they are paid out current or accumulated-blank-.
2. If current earnings and profits are not sufficient to cover all non-liquidating distributions made during a year, then current earnings and profits are-blank- the distributions while accumulated earnings and profits are-blank- the distributions.
3. Corporations may recognize-blank-on non-liquidating distributions of appreciated property.For example, if a corporation having no earnings and profits distributes a piece of equipment to a shareholder at a time when the corporation's basis in the equipment is $2,000 and the value of the equipment is $10,000, the shareholder will -blank-while the corporation will recognize a $-blank-gain.

ANSWER KEY

as gains

as dividends

retained earnings

earnings and profits

prorated among

allocated chronologically to

both gain and loss

gain, but not loss,

loss, but not gain,

recognize a $8,000 gain

recognize a $8,000 dividend

not recognize a dividend

8,000

0