Problem $6-42($LO$.1)$

Julio Inc. is a $25\%$ shareholder in Gray Corporation and is subject to a $21\%$

tax rate. It acquired $2,000$ shares of stock in Gray Corporation seven years

ago at a cost of $$50$ per share. In the current year, Julio Inc. received a

payment of $$150,000$ from Gray Corporation in exchange for $1,000$ of its

shares in Gray. Gray has E & P of $$1,000,000.$ Julio Inc. has a capital loss

carryover of $$50,000$ in the current tax year. It has no other capital gain

transactions during the year.

What amount of the capital loss may Julio Inc. deduct in the current year in

the following situations? What is the tax liability associated with the

payment?

If an amount is zero, enter $"0".$

a$.$ The $$150,000$ payment from Gray Corporation is a qualifying stock

redemption for tax purposes.

The corporation could offset $

of capital loss carryover. The

related tax liability is :

b$.$ The $$150,000$ payment from Gray Corporation does not qualify as a

stock redemption for tax purposes.

The corporation could deduct $

of the capital loss carryover.

The related tax liability is $