Bob owns 100 shares of Dylan Company. Dylan Company's 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, 2008 for \(\$ 20,000\) ( \(\$ 200\) per share). On August 10, 2018, 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 2018.
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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Lets analyze the effects of the redemption transaction on both Bob and Dylan Company under two scenarios treating the redemption as a dividend and qua...View the full answer
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Related Book For 
CCH Federal Taxation 2019 Comprehensive Topics
ISBN: 9780808049081
2019 Edition
Authors: Ephraim P. Smith, Philip J. Harmelink, James R. Hasselback
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