Omega Corporation (E & P of $700,000) has 3,000 shares of common stock outstanding. Brad owns 1,500 shares and his wife, Jane, owns 1,500 shares. Brad and Jane each have a basis of $90,000 in their Omega stock. In the current year, Omega redeems 1,000 shares from Brad for $250,000. With respect to the distribution in redemption of the Omega stock: a. Brad has a capital gain of $250,000. b. Brad has dividend income of $250,000. Brad has dividend income of $190,000. O d. Brad has a capital gain of $190,000. C.

Omega Corporation (E & P of $700,000) has 3,000 shares of common stock outstanding. Brad owns 1,500 shares and his wife, Jane, owns 1,500 shares. Brad and Jane each have a basis of $90,000 in their Omega stock. In the current year, Omega redeems 1,000 shares from Brad for $250,000. With respect to the distribution in redemption of the Omega stock: a. Brad has a capital gain of $250,000. b. Brad has dividend income of $250,000. Brad has dividend income of $190,000. O d. Brad has a capital gain of $190,000. C.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter13: Corporations: Earning & Profits And Distributions

Section: Chapter Questions

Problem 40P

See similar textbooks

Similar questions

Shetland Corporation, a C corporation, has E&P of $1,000,000. The corporation stock is held as follows: Matthew 1,000 shares Aaron 1,000 shares Fay 1,000 shares Marlyebone Partnership 1,000 shares Devon Corp. 1,000 shares Total Shares 5,000 shares Matthew would like to redeem 500 shares of stock. The fair market value of the stock is $200,000. Matthew acquired the stock 10 years ago and has a basis of $200/share in her stock. Note: Since Shetland Corporation is not traded on an exchange, Matthew does not have the option for selling his stock on an open market. Here is additional information about Shetland Corporation: Aaron is Matthew’s first cousin Fay is Matthew’s mother Matthew owns 10% of Marlyebone Partnership Matthew owns 20% of the shares in Devon Corporation Will this redemption of 500 shares of Matthew’s stock be treated as a qualified stock redemption or will it be treated as…
Shetland Corporation, a C corporation, has E&P of $1,000,000. The corporation stock is held as follows: Matthew 1,000 shares Aaron 1,000 shares Fay 1,000 shares Marlyebone Partnership 1,000 shares Devon Corp. 1,000 shares Total Shares 5,000 shares Matthew would like to redeem 500 shares of stock. The fair market value of the stock is $200,000. Matthew acquired the stock 10 years ago and has a basis of $200/share in her stock. Note: Since Shetland Corporation is not traded on an exchange, Matthew does not have the option for selling his stock on an open market. Here is additional information about Shetland Corporation: · Aaron is Matthew’s first cousin · Fay is Matthew’s mother · Matthew owns 10% of Marlyebone Partnership · Matthew owns 20% of the shares in Devon Corporation a. Will this redemption of 500 shares of Matthew’s stock be treated as a qualified stock redemption or will it be treated as a distribution? Support your answer with calculations. b. How much tax must…
ABC Corporation (E & P of $800,000) has 1,000 shares of stock outstanding. That stock is held by Josh (550 shares) and Steve (450 shares), who are unrelated individuals. ABC redeems 300 of Josh’s shares for $1,000 per share. Josh paid $50 per share for his ABC stock nine years ago. 1. Is this a qualified redemption? Why? 2. What is Josh’s realized gain/ loss? What is Josh’s recognized gain/ loss? 3. What is the character of the recognized gain/ loss?
Shetland Corporation, a C corporation, has E&P of $1,000,000. The corporation stock is held as follows: Matthew 1,000 shares Aaron 1,000 shares Fay 1,000 shares Marlyebone Partnership 1,000 shares Devon Corp. 1,000 shares Total Shares 5,000 shares Matthew would like to redeem 500 shares of stock. The fair market value of the stock is $200,000. Matthew acquired the stock 10 years ago and has a basis of $200/share in her stock. Note: Since Shetland Corporation is not traded on an exchange, Matthew does not have the option for selling his stock on an open market. Here is additional information about Shetland Corporation: Aaron is Matthew’s first cousin Fay is Matthew’s mother Matthew owns 10% of Marlyebone Partnership Matthew owns 20% of the shares in Devon Corporation Will this…
V Corp. had 1,000 shares of stock outstanding. The shares are owned by the following individuals: Anne owns 400 shares; basis of $100 per share Mother (Anne’s mother) owns 200 shares Brother (Anne’s brother) owns 400 shares V redeem 300 shares owned by Anne in exchange for land (FMV = $36,000; V Corp.’s basis = $10,000) in a qualifying redemption. What is V Corp.’s gain or loss recognized on the distribution of the land as part of a qualifying redemption? Enter gain as a positive number or loss as a negative number.
2. Naomi owns 1,000 shares of Nordstrom Corp. common stock which she purchased for $42400 and later receives a nontaxable preferred stock dividend of 200 shares of Nordstrom preferred stock when the FMV of the preferred was $60 per share and the FMV of the common was $48 per share. What is the basis of the preferred shares after the dividend? The answer is $32560 please explain how to calculate properly
The Ajax Corporation distributes 50 shares of its preferred stock to shareholder Thomas Turner, who owns 100 shares of Ajax common stock. The distribution qualifies as a nontaxable stock dividend. On the date of distribution, the Ajax common stock has a market value per share of $10 and the preferred stock has a market value per share of $3. Assume that Thomas has pre- Distribution basis of $5,000 for his common stock. What will be Thomas' basis per share for the preferred stock after accounting for the tax-free distribution? 1. 1000 2. 650 3. 450 4. 150
Magenta Corporation has 1,000 shares of stock outstanding. Julie owns 400 of these shares, and unrelated individuals own the remaining 600 shares. Magenta redeems 100 of Julie's shares for $200,000. In the year of the redemption, Magenta has $230,000 of paid-in capital and $330,000 of E&P. Requirements a. How does the redemption affect Magenta's E&P balance if the redemption qualifies for sale treatment? b. How does the redemption affect Magenta's E&P balance if the redemption does not qualify for sale treatment? Requirements a and b. How does the redemption affect Magenta's E&P balance if the redemption qualifies for sale treatment and if the redemption does not qualify for sale treatement? (If an input field is not used, leave the input field empty. Do not select a label or enter a zero.) Remaining Redemption qualifies for sale treatment Redemption does not qualify for sale treatment Effect on E&P By this amount amount (if Treatment of remaining applicable) amount
Colter Corporation has two shareholders: Arlen with 70 shares and Marcy with 30 shares. Colter has E&P of $100,000 and capital stock and paid-in-capital accounts totaling $200,000. Colter redeems 10 of Arlen's shares for $31,000. Arlen paid $2,000 per share for the shares 5 years ago. As a result of this transaction _____________________. Question options: a. Arlen will have a long-term capital gain of $11,000. b. Arlen will have dividend income of $31,000. c. Colter's E&P will be reduced by 10% of the outstanding E&P on the distribution.
All of the stock in Green Corporation (E & P of $240,000) is held by three unrelated individuals as follows: Rashad has 15 shares, Keshia has 15 shares, and Jose owns 20 shares. Green Corporation redeems 10 of Jose’s shares (basis of $36,000) for $40,000. If Jose’s stock is a capital asset and has been held for the requisite holding period, he has a long-term capital gain of $4,000 Group of answer choices True False
Bonnie and Clyde are the only two shareholders in Getaway Corporation. Bonnie owns 60 shares with a basis of $4,400, and Clyde owns the remaining 40 shares with a basis of $13,500. At year-end, Getaway is considering different alternatives for redeeming some shares of stock. Evaluate whether each of the following stock redemption transactions will qualify for sale and exchange treatment. (Leave no answer blank. Enter zero if applicable.) Required: a. Getaway redeems 10 of Bonnie's shares for $3,000. Getaway has $29,000 of E&P at year-end and Bonnie is unrelated to Clyde. b. Getaway redeems 25 of Bonnie's shares for $6,000. Getaway has $29,000 of E&P at year-end and Bonnie is unrelated to Clyde. c. Getaway redeems 8 of Clyde's shares for $3,500. Getaway has $29,000 of E&P at year-end and Clyde is unrelated to Bonnie. Complete this question by entering your answers in the tabs below. Req A Req B Req C Getaway redeems 10 of Bonnie's shares for $3,000. Getaway has $29,000 of E&P at…