Assumptions: Use a flat corporate tax rate of 21% for all problems. Assume a tax rate of 15% for all dividends and capital gains. Assume there is no Alternative Minimum Tax for these problems. Assume that all entities are US domestic corporations, taxed under Subchapter C of the IRC unless otherwise noted. the internal revenue code.

Question: 35 Points

Bob, Hazel, John and Howard own the Hawke Corporation. During 2018 it had the following taxable income. Gross Receipts 200,000 Operating expenses (100,000) (Assume all deductible) Book Income 100,000 At January 1, 2018 the ownership of the corporation was as follows: Shares Bob 50, Hazel 20, John 20, Howard 10, Total 100. All of the shareholders had a basis per share of $1,000, and the shareholders are all unrelated. They have all held their shares for a number of years. On January 1, 2018, Hawke Corporation's accumulated E&P was $100,000. On September 1, 2018, Hawke Corporation redeemed the following shares for $2,500 per share. Bob 20 Hazel 4 John 10 Howard 2 Total 36 Questions: A What are the current E&P for the Hawke Corporation for 2018? B What are the tax consequences to Bob as a result of the September 1 "redemption?" B.2 Would your answer to B. change if Bob and Hazel were married? What would be the tax consequences to Bob? Ignore your answer to B.2 for the rest of the questions. C What are the tax consequences to John as a result of the September 1 "redemption?" D What are the tax consequences to Howard as a result of the September 1 "redemption?" E What are the accumulated E&P for the Hawke Corporation as at January 1, 2019?