T Corporation has 100 shares of stock outstanding owned, as indicated below T has accumulated E&P of
Question:
T Corporation has 100 shares of stock outstanding owned, as indicated below T has accumulated E&P of $40,000. Buck Smith is unrelated to Tina Smith, and John Brown is unrelated to Lucy Brown. The Smiths and the Browns are not related. During the year, the corporation redeemed 27 shares from the shareholders as shown below, paying $2,000 for each share redeemed. Each shareholder had a $250 basis in each share of stock owned prior to the redemption.
Name | Shares Before | Shares Redeemed |
Buck Smith | 40 | 8 |
Tina Smith | 10 | 8 |
John Brown | 45 | 17 |
Lucy Brown | 5 | 4 |
a) What are the tax consequences of the redemption to Buck Smith? Indicate the income, its character, and the basis of his remaining stock.
b) What are the tax consequences of the redemption to John Brown? Indicate the income, its character, and the basis of his remaining stock.
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th Edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson