If the amount of a corporate distribution is less than the amount of the corporate earnings and profits, the return of capital concept does not apply and the shareholders' adjusted basis for the stock remains unchanged.

Question

Quizplus · Accepted Answer

This is true. If the distribution is less than the earnings and profits, it is considered a partial liquidation and the return of capital concept does not apply. Therefore, the shareholders' adjusted basis for the stock remains unchanged.

If the Amount of a Corporate Distribution Is Less Than