Bob owns 100 shares of Dylan Company. Dylan Companys other 400 outstanding shares are owned by unrelated
Question:
Bob owns 100 shares of Dylan Company.
Dylan Company’s other 400 outstanding shares are owned by unrelated parties. Bob bought the shares on December 14, 2009 for $20,000 ($200 per share). On August 10, 2019, Dylan Company redeemed 60 shares from Bob. Bob received $50,000 for the shares. Dylan Company’s paid-in-capital balance was $120,000 and its E&P was
$400,000 in 2019,
a. What is the effect of the transaction on Bob and Dylan Company if the redemption is treated as a dividend?
b. What is the effect of the transaction on Bob and Dylan Company if the redemption qualifies for redemption status?
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a If the redemption is treated as a dividend When a redemption is treated as a dividend it means tha...View the full answer
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Related Book For 
CCH Federal Taxation Basic Principles 2020
ISBN: 9780808051787
2020 Edition
Authors: Ephraim P. Smith, Philip J. Harmelink, James R. Hasselback
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