{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

stock_redemption_examples - What are Rexs and Alex's basis...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Topic: Stock redemptions Rex, Steve, and Alex are the only shareholders of the Lowell Corporation. Rex is unrelated to Steve and Alex. However, Steve and Alex are brothers. Each has owned 100 shares of Lowell Corporation stock for five years and each has a $150,000 basis in his 100 shares. Lowell Corporation's current E&P is $200,000 and its accumulated E&P is $400,000. Required: a. Lowell redeems all 100 of Steve's shares for $250,000, their fair market value. What is the amount and character of Steve's recognized gain or loss? What effect does the redemption have on Lowell's E&P?
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: What are Rexs and Alex's basis in their shares after the redemption? b. Approximately 9 months after Steve's shares are redeemed; Lowell Corporation redeems 30 shares from Rex for $75,000. Just prior to the distribution, Lowell Corporation's current E&P is $50,000, and its accumulated E&P is $400,000. What is the amount and character of Rexs recognized gain or loss? What effect does the redemption have on Lowell's E&P? What are Rexs and Alex's basis in their remaining shares after the redemption?...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern