A, B and C, who are unrelated, each own 1,000 shares of common stock (the only class outstanding) of X Corporation with a fair market value of $400 per share. X has $600,000 of accumulated and no current earnings and profits. A and C each have $50,000 adjusted basis in their X stock B, who recently received her stock as an inheritance, has a $400,000 adjusted basis B wishes to retire and dispose of her stock. What are the tax consequences of the following alternative transactions?

1. Pursuant to a cross-purchase buy-sell agreement, B sells 500 shares each to A and C for $200,000 each.

2. Pursuant to an entity-purchase buy-sell agreement, X redeems all of B's stock for $400,000.

3. Same as (1), above, except the agreement required A and C to buy B's stock over ten years, with appropriate interest, but they did not have sufficient funds to make the payments so they caused X to make them on their behalf.

4. A and C had options to buy B's stock when B retired but they were short of funds and allowed X to redeem the stock instead.

Answer rating: 100% (QA)

Tax consequencesTC 1 There is no TC as the gain is 0 2 There is no TC as the gain is 0 3 The interes... View the full answer