Petoskey Stone Quarry Incorporated ( PSQ ) , a calendar - year, accrual - method C corporation,
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Question:
Petoskey Stone Quarry Incorporated PSQ a calendaryear, accrualmethod C corporation, provides landscaping supplies to local builders in northern Michigan. PSQ has always been a familyowned business and has a single class of voting common stock outstanding. The outstanding shares are owned as follows:
Number of shares
Nick
Abigail Nicks daughter
Charlie Nicks son
Sandler Nicks father
Amy Sandlers sister
Total shares
Nick serves as president of PSQ and his father, Sandler, serves as chair of the board. Amy is the company's CFO, and Abigail and Charlie work as employees of the company. Sandler would like to retire and sell his shares back to the company. The fair market value of the shares is $ Sandler's tax basis is $
The redemption is tentatively scheduled to take place on December of this year. At the beginning of the year, PSQ had accumulated earnings and profits of $ The company projects current E&P of $ The company intends to pay pro rata cash dividends of $ per share to its shareholders on December of this year.
Required:
a Assume the redemption takes place as planned on December and no elections are made by the shareholders.
What amount of dividend or capital gain will Sandler recognize because of the stock redemption?
How will the tax basis of Sandler's stock be allocated to the remaining shareholders?
b If Sandler files a proper election to waive the family attribution rules, what is the amount of his gain?
Related Book For
Taxation Of Individuals And Business Entities 2015
ISBN: 9780077862367
6th Edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
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