Cougar Company is owned equally by Cat Stevens and a partnership that is owned equally by his father and two unrelated individuals Cat and the partnership each own 3,000 shares in the company Cat wants to reduce his ownership in the company, and it is decided that the company will redeem 1,500 of h...

Cat owns directly 3000 shares in Cougar Company and owns 1000 sha ...

Cougar Company is owned equally by Cat Stevens and a partnership that is owned equally by his

Question:

Cougar Company is owned equally by Cat Stevens and a that is owned equally by his father and two unrelated individuals. Cat and the each own 3,000 shares in the company. Cat wants to reduce his ownership in the company, and it is decided that the company will redeem 1,500 of his shares for $25,000 per share. Cat's income tax basis in each share is $5,000. What are the income tax consequences to Cat as a result of the stock redemption, assuming the company has earnings and profits of $10 million?
Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...