stock_redemption_examples

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

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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?
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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?...
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This note was uploaded on 09/09/2011 for the course TAX 5015 taught by Professor Kelliher,c during the Spring '08 term at University of Central Florida.

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