Question
Corporations 2,000 shares outstanding are owned as follows: Paul, 800 shares Sandra (Pauls sister), 800 shares and Greta (Pauls granddaughter), 400 shares. During the current
Corporations 2,000 shares outstanding are owned as follows: Paul, 800 shares Sandra (Pauls sister), 800 shares and Greta (Pauls granddaughter), 400 shares. During the current year, Krispy (E & P of $1 million) redeemed 600 shares of Pauls stock for $100,000. If Paul acquired the 800 shares five years ago for $40,000, what are the consequences of the redemption of the 600 shares:
Question 32 options:
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| Paul has tax free return of capital of $100,000 |
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| Paul has capital gain income of $70,000 |
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| Paul has dividend income of $100,000 |
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| Paul has capital gain income of $60,000 |
Silver Corporation (E & P of $1.2 million) distributes land (basis of $410,000, fair market value of $650,000) to Kathy, a shareholder, to carry out a qualifying stock redemption. Kathy had a basis of $90,000 in the shares redeemed. Which of the following is an correct statement regarding the redemption?
Question 33 options:
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| If the land is distributed subject to a $500,000 liability, Silver Corporation will recognize a gain of $90,000. |
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| If the land is distributed without any liability, Kathy will recognize a gain of $320,000. |
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| If the land is distributed subject to a $700,000 liability, Silver Corporation will recognize a gain of $290,000. |
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| If the land is distributed subject to a $500,000 liability, Kathy will have a basis in the land of $500,000 |
In 2011, Francine transferred property she had used in her sole proprietorship to Charcoal Corporation for 2,000 shares of Charcoal Corporation in a transaction that qualified under 351. At the time of formation, the assets she transferred had a tax basis to her of $400,000 and a fair market value of $700,000. In 2019, Charcoal Corporation (total E & P of $250,000) redeems 600 shares from Francine for $260,000. With respect to the redemption, which of the following is correct:
Question 34 options:
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| If this is a qualified redemption, Francine will have a $260,000 capital gain. |
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| If this is a non-qualified redemption, Francine will have a $260,000 dividend |
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| If this is a qualified redemption, Francine will have a $140,000 capital gain |
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| If this is qualified redemption, Francine will have a $140,000 capital loss |
The Statements on Standards for Tax Services (SSTS) are issued by the:
Question 35 options:
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| American Bar Association (ABA) |
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| The American Institute of CPAs (AICPA) |
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| Department of Treasury |
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| Internal Revenue Service |
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