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5. Rasputin owns 500 shares of the total outstanding stock of 750 shares for Magenta Company. His stock basis is $50,000. Rasputin, subsequently, sells 250
5. Rasputin owns 500 shares of the total outstanding stock of 750 shares for Magenta Company. His stock basis is $50,000. Rasputin, subsequently, sells 250 of his shares back to Magenta Company for $20,000. Magenta Company has E & P of $100,000. Rasputins sale of his stock to Magenta Corporation will be treated as (show work, as to why):
A) dividend income
B) a sale transaction
C) a return of capital
D) some other treatment
Need help with this problem with the numerical calculations and I think it should be A.
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