Meter Inc. has 220,000 common shares outstanding. All of these shares were issued for $12 each, for a total of $2,640,000, which is also equal to the PUC of the shares. A dissident shareholder, who acquired 15,000 shares at a price of $10 per share, has repeatedly voiced dissent with the direction of the company. As a result, the company has agreed to sever its connection with the dissident shareholder and has offered to redeem his shares for $12.50 each, an offer which has been accepted. Any dividends resulting from the redemption will be considered as non-eligible.

Required: Determine the income tax consequences of this redemption to the departing shareholder.

Answer rating: 100% (QA)

As a result of the redemption of the dissident shareholders shares the company will need to calculat... View the full answer