Z Corp. has 200 shares of outstanding stock, which are owned by three unrelated individuals as follows:
Question:
Z Corp. has 200 shares of outstanding stock, which are owned by three unrelated individuals as follows: Q owns 120 shares, R own 60 shares, and S owns 20 shares. During the year, Z Corp. redeemed 30 shares from Q for $36,000. Q’s basis for the stock is $100 per share. Z had E&P before the redemption of $35,000. Use the above information to answer the following three questions.
Z's E&P will decrease by
$36,00
$5,250
$8,750
$35,000
None of the above
As a result of the redemption, Q should report
$36,000 dividend income
$21,000 dividend income and $15,000 capital gain
$35,000 dividend income
$6,000 capital gain
None of the above
If Z redeemed 60 shares from Q for $72,000, Z’s E&P will decrease by
$10,500
$35,000
$12,500
$0
None of the above
The Legal Environment of Business
ISBN: 978-0538473996
11th Edition
Authors: Roger E Meiners, Al H. Ringleb, Frances L. Edwards