Golf, Inc. (GI) is a successful operator of golf courses, golf tournaments, and related retail shops.GI has been in existence for many years and has substantial earnings and profits.GI is owned equally by four individuals: Arnie, Arnie's son Jack, Arnie's grandson Phil, and Tiger who became a stockholder more recently.Each individual owns 25% of the outstanding stock, and each works full time in the business.

1.Tiger has decided to go back to school to pursue a new career as a surgeon specializing in golf related injuries.He would like to stop working for the company and cash out some of his interest to pay for school.He decides to sell 6 of his 25 shares back to GI for $1,000,000. His tax basis in the shares he sells back is $1,000,000.Tiger is assuming that he will have no gain or loss and therefore no tax to pay on the redemption.Is Tiger correct?

1.Arnie has decided to retire and concentrate on selling lemonade and ice tea.He wants GI to buy out his entire interest.He has a capital loss carryover so he wants the redemption to qualify as a capital gain. Is that possible?

2.Jack decides to become a zoo keeper.Since zoo keepers don't make much money, he wants GI to buy back his stock, but will continue to work part time for GI.Jack has a capital loss carryover that should more than offset any gain on the buyback.Is Jack correct?