On 8/16/X4, Steve and seven individuals formed Z Corporation and each received the following number of shares
Question:
On 8/16/X4, Steve and seven individuals formed Z Corporation and each received the following number of shares of Z co. voting stock:
Steve's Father 4,000
Steve's Mother 3,000
Steve 2,000
Steve's Sister 3,000
Steve's Grandfather 4,000
Steve's Cousin 500
Steve's Wife 1,000
Steve's Unrelated Friend Joe 2,500
On 9/18/X8 Z co. redeemed 500 of Steve's shares for $1,500, 2,000 of his father's shares, 2,000 of his mother's shares and 500 of Joe's shares. Steve's basis in the redeemed shares was $800.
a. Determine how Steve will characterize the $1,500 distribution from Z co.
b. Determine how Steve will characterize the $1,500 distribution from Z co., if instead Z co. had redeemed 500 of Steve's shares, 2,000 of his father's shares, 500 of his wife's shares and 1,000 of Joe's shares.
Canadian Income Taxation Planning And Decision Making
ISBN: 9781259094330
17th Edition 2014-2015 Version
Authors: Joan Kitunen, William Buckwold