Vol 2 Add'l Test Bank Ch06

Vol 2 Add'l Test Bank Ch06 - Corporations Redemptions and...

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Redemptions and Liquidations 6-1 CHAPTER 6 CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS EXAMINATION QUESTIONS ____1. Both corporate and noncorporate shareholders receive more favorable tax treatment from a qualifying stock redemption than from a nonqualified stock redemption. ____2. A corporation distributes property (fair market value of $10,000; basis of $7,000) to a shareholder in a qualifying stock redemption. The shareholder will have a basis in the property equal to the corporation’s basis in the property, or $7,000. ____3. A sale of preferred stock that is § 306 stock typically results in capital gain to the shareholder. 4. Five years ago, Sophie transferred property she had used in her sole proprietorship to Galaxy Corporation for 100 shares of Galaxy Corporation in a transaction that qualified under § 351. The assets had a tax basis to her of $400,000 and a fair market value of $600,000 on the date of the transfer. In the current year, Galaxy Corporation (E & P of $900,000) redeems 20 shares from Sophie for $300,000 in a transaction that qualifies for sale or exchange treatment. With respect to the redemption, Sophie will have a: a. $300,000 dividend. b. $300,000 capital gain. c. $220,000 dividend. d. $220,000 capital gain. e. None of the above. 5. Nebula Corporation distributes property worth $100,000, basis of $50,000, to a shareholder in a distribution that is a qualifying stock redemption. The property is subject to a liability of $90,000, which the shareholder assumes. The basis of the property to the shareholder is: a. $40,000. b.
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Vol 2 Add'l Test Bank Ch06 - Corporations Redemptions and...

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