Z is a corporation in the fast food business and the shoe business and has two individual
Question:
Z is a corporation in the fast food business and the shoe business and has two individual shareholders, C and D. Z's slogan is, "Take Care of Your Feet While You Eat." Z owns 10 fast food stroes which are adjacent to 10 shoe stores that it owns. This arrangement has continued for at least 10 years. Z proposes to sell the fast food stores since one of his executives ahs taken to heart the comment that fast food is neither. Z will distribute the proceeds of the sale of the food stroes to C and D in pro rata redempiton. Z will over time convert its shoe inventory to upscale footwear made in Italy and Brazil.
a. The pro rata distribution is a dividend to C and D
b. The pro rata distribution is a dividend to C and D since they did not surrender any shares for redemption.
c. The pro rata distribution is not essentially equivalent to a dividend under 302 (b)(1)
d. The pro rata distribution is not essentially equivalent to a dividend under 302(b)(4)
e. None of the above.
Which is the correct answer and why?
Law for Business
ISBN: 978-1259722325
13th edition
Authors: A. James Barnes, Terry M. Dworkin, Eric L. Richards