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Unformatted text preview: 4d21964a0ce1734ea7002643c7a86688fcc2fa2f.doc. Page 1 of 7 First Name Last Name Home work-Chapter 6. On the right side of the page enter letter of the best answer for each question. Enter the letter of each answer on the separate answer sheet posted on web page for this chapter: File: C12-Chp-06-2-HW-Sol-Redeem-Liquid-2012-Answer Sheet. (38 @ 2.5 Pts. = 95 + 5) Stock Redemptions 1 [Pg. 3. §301, §302, §1001, §1(h), §11, §243] R Corporation, which has substantial earnings and profits, redeems 50 of T's shares (basis of $100 per share to T) for $60,000. What is the effect of the redemption on T? a. $60,000 capital gain if it is treated as a dividend B b. $60,000 dividend income if it is treated as a dividend c. $55,000 capital gain if it is treated as a dividend d. $55,000 dividend income if it is treated as a dividend 2 [Pg. 5+. §301, §302, §1001, §1(h), §11, §243] Big Corp. is owned by June. June's basis in her stock is $250,000. Her stock has a FMV of $1,000,000. Big Corp. has earnings and profits of $300,000. June will receive a distribution of $100,000 from Big Corp. in redemption 10% of her Big Corp. stock. June will continue in her role as owner and CEO. What will be the tax effect of this redemption on June? a . $75,000 capital gain b. $75,000 dividend C c. $100,000 dividend d. $100,000 capital gain 3 [Pg. 8. §301, §302, §1001, §1(h)] Beaver Corporation is owned by two unrelated individuals, Ward and June. Beaver has earnings and profits of $300,000. Ward is not active in the business. He has decided to retire from the business completely and move to Oregon. Accordingly, Beaver Corporation will redeem all the stock owned by Ward. In return, Ward will receive a distribution of $450,000. Ward's adjusted basis in the stock is $250,000. What will be the tax effect for Ward? a. $150,000 capital gain b. $300,000 dividend D c. $400,000 dividend d. $200,000 capital gain IRS-1995 4 [Pg. 8. §301, §302, §1001] A corporation is owned 90% by Jones and 10% by Smith . Jones owns 90 shares with a cost of $100 per share. Smith owns 10 shares with a cost of $100 per share. The company redeems 50 shares from Jones at a redemption price of $300 per share. No stock is redeemed from Smith. This is not a redemption to pay death taxes, and it is not a partial liquidation. What is the tax impact on Jones? a. Dividend income of $15,000 c. Dividend income of $10,000 A b. Capital gain of $15,000 d. Capital gain of $10,000 e Other 5 [Pg. 5+. §301, §302, §1001] A corporation is owned 70% by Jones and 30% by Smith . Jones owns 70 shares with a cost of $100 per share. Smith owns 30 shares with a cost of $100 per share. The company redeems 50 shares from Jones at a redemption price of $300 per share....
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- Spring '08