Kathy purchased 900 shares of common stock of Stanley Corporation in 2014 for $30,000 (this number of shares was equivalent to 60% of the ownership of the corporation and was the corporation’s only class of stock outstanding). During 2017, the corporation distributed a 10% stock dividend (there was no option to take cash). During the current year, Stanley’s Corporation redeemed 450 shares of Kathy’s stock for $17,000. Kathy was the only shareholder who had shares redeemed.

Determine the tax implications of these transactions for Kathy. Be sure to show supporting calculations for determining the treatment.

Answer rating: 100% (QA)

ANSWER Taxes can eat into your annual earnings To counter this tax planning is a legitimate way of r... View the full answer