Salkey Company has two owners, Gus and Jack, who are father and son. Gus owns 100 shares

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Salkey Company has two owners, Gus and Jack, who are father and son. Gus owns 100 shares which he acquired in 2014 for

$15,000. Jack owns 100 shares which he acquired in 2016 for $21,000. Salkey’s current E&P in 2019 is $70,000. On March 18, 2019, Salkey redeemed 35 shares from Gus in return for land worth $50,000 and an adjusted basis of $10,000.

a. Does the redemption qualify as a sale?

b. What are the income tax consequences to Gus, Jack, and Salkey Company?

c. Would your answers to

(a) and

(b) differ if Gus and Jack were brothers? If so, how?

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CCH Federal Taxation Basic Principles 2020

ISBN: 9780808051787

2020 Edition

Authors: Ephraim P. Smith, Philip J. Harmelink, James R. Hasselback

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Question Posted: Feb 27, 2024 03:06 AM

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Salkey Company has two owners, Gus and Jack, who are father and son. Gus owns 100 shares

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a To determine if the redemption qualifies as a sale we need to check whether it meets the criteria ...View the full answer

CCH Federal Taxation Basic Principles 2020

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