Question
Eight years ago, Cher transferred property she had used in her sole proprietorship to Believe Corporation for 2,000 shares of Believe Corporation in a transaction
Eight years ago, Cher transferred property she had used in her sole proprietorship to Believe Corporation for 2,000 shares of Believe Corporation in a transaction that qualified under 351. The assets had a tax basis to her of $400,000 and a fair market value of $700,000 on the date of the transfer. In the current year, Believe Corporation (E & P of $1,000,000) redeems 600 shares from Cher for $260,000 in a transaction that does not qualify for sale or exchange treatment. With respect to the redemption, Cher will have a:
a.
$140,000 dividend.
b.
$260,000 dividend.
c.
$140,000 capital gain.
d.
$260,000 capital gain.
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