ZuoTi.Pro
Question

Bob, Carl, and Dan, unrelated individuals, own 30 shares, 30 shares, and 40 shares, respectively, in...

Bob, Carl, and Dan, unrelated individuals, own 30 shares, 30 shares, and 40 shares, respectively, in JH Corporation. JH has 100 shares outstanding and E&P of $200,000. The corporation redeems 20 shares of Dan’s stock for $30,000. Dan paid $200 a share for the stock two years ago. What will be tax consequences to Dan upon redemption?

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

For tax purposes redemption of shares means disposition of shares and accordingly capital gain or loss may arise as a result.

In the given situation Dan who holds 40 shares in which shares are redeemed . Since the shares are bought two years ago the resulting gain is a Long term capital gain as follows

Redemption amount paid to Dan = $30000

Amount paid by Dan while purchasing(20*200) =$4000

Long term capital gain on redemption =$26000

The above long term capital gain is taxed as per the provisions applicable.

0 0
Add a comment
Know the answer?
Add Answer to:
Bob, Carl, and Dan, unrelated individuals, own 30 shares, 30 shares, and 40 shares, respectively, in...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 26. Julian, Berta, and Marta own 400 shares, 400 shares, and 200 shares, respectively, in Caramel...

    26. Julian, Berta, and Marta own 400 shares, 400 shares, and 200 shares, respectively, in Caramel Corporation $800,000). Berta is Julian's sister, and Maria is Julian's aunt. Caramel Corporation redeems all of Julian's stock $500,000. Julian paid $200 a share for the stock five years ago, Julian continued to serve on Caramel's board of directo after the redemption. What are the income tax consequences to Julian with respect to the redemption

  • Mavis, Sierra, and Julie, sisters own 100 shares, 100 shares and 200 shares respectively in 2....

    Mavis, Sierra, and Julie, sisters own 100 shares, 100 shares and 200 shares respectively in 2. Orange Corporation. Orange Corporation has E&P of $150,000. The corporation redeems 60 shares of Julie's stock for $60,000. Julie paid $250 a share for the stock five years ago. With respect to the redemption: Julie has LTCG of 45,000 Julie has LTCG of 60,000 a. b. Julie has dividend income of 60,000 Julie has dividend income of 45,000 C. d. None of the above...

  • Question 1 (6.66 points) Amanda, Barbara, and Carol, unrelated individuals, own all of the stock in New Corporation...

    Question 1 (6.66 points) Amanda, Barbara, and Carol, unrelated individuals, own all of the stock in New Corporation (E & P of $3.0 million) as follows: Amanda, 600 shares; Barbara, 200 shares; and Carol, 100 shares. New redeems 150 of Amanda's shares (basis of $600,000) for $1,200,000. With respect to the distribution in redemption of the stock: A) Amanda has dividend income of $600,000 B) Amanda has dividend income of $1.200,000 C) Amanda has capital gain of $1.200.000 D Amanda...

  • Scarlet Witch, The Vision, and Peter Parker, unrelated individuals, own all of the stock in New...

    Scarlet Witch, The Vision, and Peter Parker, unrelated individuals, own all of the stock in New Avengers Corporation (E & P of $800,000) as follows: Scarlet Witch, 500 shares; Vision, 150 shares; and Peter, 100 shares. New Avengers redeems 225 of Scarlet Witch’s shares (basis of $100,000) for $325,000. a.       Will this transaction qualify as a redemption of stock? b.      What amount of gain will Scarlet Witch realize and recognize and what will be the character of the gain?

  • Sam owns 60 percent of the stock of Club Corporation. Unrelated individuals own the remaining 40...

    Sam owns 60 percent of the stock of Club Corporation. Unrelated individuals own the remaining 40 percent. For a stock redemption of Sam's stock to be treated as an exchange under the "substantially disproportionate" test, what percentage of Club stock must Sam own after the redemption? Multiple Choice All stock redemptions involving individuals are treated as exchanges. Any percentage less than 60 percent. Any percentage less than 48 percent. Any percentage less than 50 percent.

  • ABC Corporation has outstanding shares of common stock of which A, B, C and D each...

    ABC Corporation has outstanding shares of common stock of which A, B, C and D each owns 100 shares. In on transaction, ABC Corporation redeems 55 shares from A, 25 shares from B, and 20 shares from C. The earnings and profits of ABC Corporation was $100,000 on the date of redemption. The redemption price was $100 per share. The shareholders purchased their stock more than one year ago for $80 per share. What is the tax effect to C...

  • 6. Broadbill Corporation (E & P of $650,000) has 1,000 shares of common stock outstanding. The shares are owned by t...

    6. Broadbill Corporation (E & P of $650,000) has 1,000 shares of common stock outstanding. The shares are owned by the following individuals: Tammy, 300 shares; Yvette, 400 shares; and Jeremy, 300 shares. Each of the shareholders paid $50 per share for the Broadbill stock four years ago. In the current year, Broadbill Corporation distributes $75,000 to Tammy in redemption of 150 of her shares. Determine the tax consequences of the redemption to Tammy and to Broadbill under the following...

  • Beola and Leona, individuals, own all of the outstanding stock of Carl Corporation. Each has a...

    Beola and Leona, individuals, own all of the outstanding stock of Carl Corporation. Each has a basis of $20,000 in their twenty (20) shares of stock. Carl Corporation has Accumulated Earnings And Profits (E&P) of $1,000,000. Beola wishes to retire in the current year and wants to sell her stock for its Fair Market Value of $600,000. Leona would like to purchase Beola's shares and, thus, become the sole shareholder of Carl Corporation but does not have any available Cash....

  • Walker Corporation distributes to its shareholder Brayden (an individual s/h) a piece of land with FMV...

    Walker Corporation distributes to its shareholder Brayden (an individual s/h) a piece of land with FMV $1,000,000. Walker purchased the land ten years ago for $600,000. Walker’s current E&P is $200,000 and its accumulated E&P is $50,000. Brayden’s stock basis is $475,000. Brayden owns 85 shares (85%) of Walker Corporation. The remaining 15 shares (25%) are owned by an unrelated party. (6.5 Points) What are the tax consequences to Walker Corp and Brayden if this is a nonliquidating distribution? What...

  • Five unrelated U.S. individuals own all of the shares of Popping, a corporation organized in the ...

    Five unrelated U.S. individuals own all of the shares of Popping, a corporation organized in the United States but operating fully in the country Vivace. Mariam, one of the shareholders, asks you whether the income from Popping will be taxed to her immediately as earned, as she believes the entity is classified as "a controlled foreign corporation (CFC)." Explain how the Federal income tax law applies to the profits earned by Popping. Use the correct Federal income tax terminology in...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT