Julian, Berta, and Maria own 400 shares, 400 shares, and 200 shares, respectively, in Caramel Corporation (E & P of $750,000). Berta is Julian's sister, and Maria is Julian's aunt. Caramel Corporation redeems 20% of Julian's stock for $420,000. Julian paid $200 a share for the stock five years ago Julian continued to serve on Caramel's board of directors after the redemption. With respect to the redemption:

a) Is this a disproportionate redemption?

b) How much Dividend income must Julian report?

c) How much Long – term / short term capital gain must Julian report?

Answer rating: 100% (QA)

a The redemption is a complete termination redemption of 302b3 and qualifies ... View the full answer