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5 ) An investor takes a 1 0 % stake in a large publicly traded corporation and then succeeds in pressuring the board of the

5) An investor takes a 10% stake in a large publicly traded corporation and then succeeds in pressuring the board of the company to make various internal changes that should improve the value of the firm.
Later, the investor decides he wants to sell his stock, but he cannot find anyone to buy it as a block. To keep the stock from being sold on the open market and depressing the price, the company agrees to repurchase the investors entire block of stock at a price exceeding his basis.
What is the proper tax treatment of this share redemption, from the point of view of the investor?
6) Sarah Smiles sells her 40% interest in Smiles Inc., an S corporation, to Frankie Frownie on January 31.
Smiles Inc. earned $420,000 from January 1 to January 31 and a total of $2,890,000 from January 1 through December 31(366 days).
Using the daily allocation method, how much income should Sarah Smiles report?
7) Walsteins, an S corporation, reports the following results for the current year:
Ordinary income $45,000
Long-term capital gain $10,000
Municipal bond interest income $5,000
Walsteins makes a $250,000 cash distribution to its sole shareholder during the year. The shareholder's basis for Walsteins stock on January 1 was $110,000.
How much of the distribution will be taxable?
8) An individual owns 25% of the stock of an S corporation. At the beginning of the year, the basis for that share of the stock is $100,000.
During the year, the corporation has ordinary income of $150,000, bond income of $30,000, long-term capital gains of $25,000, and a short-term capital loss of $15,000.
The corporations tax year is the same as the calendar year.
What is the individuals basis at the end of the year?

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