Simba and Disney, LP (a partnership) each own 1,500 shares in Lion King, Inc. Disney, LP is
Question:
Simba and Disney, LP (a partnership) each own 1,500 shares in Lion King, Inc. Disney, LP is owned 1/3 by Simba. Simba and Disney have owned the shares in Lion King Inc. for 15 years. Simba, wanting to move on to individual ventures in preparation of becoming the leader of his kingdom, decides to reduce his interest in Lion King, Inc. To achieve this, Lion King, Inc. will redeem 750 of Simba's shares in the corporation for $50,000 per share (a total of $37,500,000). Simba's basis in his 1,500 shares is $750,000, or $500 per share. Finally, Lion King, Inc., after many successful years of operation, has $10,000,000 of earnings and profits at the date of the redemption. Calculate.
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty