At the beginning of the current year ACME, Inc. has two shareholders: Shareholder 1 owns 60% of
Question:
At the beginning of the current year ACME, Inc. has two shareholders: Shareholder 1 owns 60% of the stock and Shareholder 2 40%. Shareholder 1 has a basis in their stock of $200,000 and Shareholder 2 has basis of $150,000. The shareholders are not related to one another. ACME’s Current E&P for the year is $500,000.
During the year ACME makes the following stock redemptions:
Redemption 1: Purchases 10% of each of the shareholders shares for a total of $100,000 (split equally). Shareholder 1’s basis in the stock sold was $20,000 and shareholder 2 is $10,000.
Redemption 2: Purchase all of shareholder 2’s remaining shares for $150,000.
Required: How much does shareholder 2 include in their income for the year as a result of the two redemptions?
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th Edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson