Father owns 40 % of Family Corporation ( FC ) Son owns 30 % of FC and Daughter owns 30 % of FC (Father's 2 children are Son and Daughter) Father wants to retire and have Son and Daughter each own 50 % of FC Son and Daughter do not have enough money to buy Father's shares. Father insists that the results of the transaction generate a capital gain for him rather than dividend income. (Father has a high basis in FC shares.) You suggest that the FC reddem all of Father's shares of FC Which of the following statements is correct? O A. Because a redemption is the sale of shares to a Corporation, it will always result in a capital gain O B. If Father becomes Chairman of the Board and President of FC after the redemption. Capital gain treatment will be available if the family attribution rules are waived. OC. The redemption of all of Father's shares will result in capital gain treatment because it qualifies as a substantially disproportionate redemption OD. The redemption of all of Father's shares will result in capital gain treatment because it will qualify as a complete termination of interest as long as the family attribution rules are waived. However, to waive the family attribution rules Father may not be the Chairman of the Board or President of FC Jill owns 600 shares of Cubco, Inc, Debbie owns 200 shares of Cubco Inc , and Heather owns 200 shares of Cubco Inc Jill is Heather's mother Debbie is unrelated to Jill and Heather. On June 30, 2019, Cubco redeems 250 shares of stock from Jill. Jill receives $350,000 from Cubco and the stock redeemed has a basis of $300,000. Cubcol has earnings and profits of $1,000,000 As a result of this redemption what gain or income must Jill recognize ? O A. Jill recognizes $50,000 dividend income B. Jill recognizes $350,000 of dividend income. C. Jill recognizes $50,000 capital gain OD. Jill recognizes $300,000 capital gain. Eva contributes land ( capital asset) with a fair market value of $400,000 and a tax basis of $600,000 for 300 shares of EJ Corp and a note for $100,000 Josie contributes a warehouse with a fair market value of $800,000 and a tax basis of $200,000 The warehouse is subject to a mortgage of $500,000 which is assumed by EJ Corp Josie receives 300 shares of EJ Corp. What gain or loss is recognized by Eva and Josie ? O A Eva recognizes no gain or loss, Josie recognizes $600,000 gain OB. Eva recognizes no gain or loss, Josie recognizes $300,000 gain. O c. Eva recognizes $200,000 loss, Josie recognizes no gain or loss. D. Eva recognizes $100,000 loss, Josie recognizes $500,000 gain Josie owns 70 % and Eva 30 % of JE , Inc. (JEI) Josie sells land with a fair market value of $1,000,000 and a tax basis of $1,300,000 to JEI for $1,000,000. Two years later JEl sells the land to an unrelated third party for $1.200,000. What gain or loss do Josie and JEl recognize as a result of these transactions ? OA. Josie recognizes a $300,000 loss and JEl recognizes a $200,000 gain, B. Neither Josie nor JEl recognize any gain or loss. C. Josie recognizes no gain or loss and JEl recognizes a $200,000 gain D. Josie recognizes no gain or loss and JEl recognizes a $100,000 loss
