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Griffey Corporation has 4 0 , 0 0 0 of accumulated EP and incurs a loss of $ 3 0 , 0 0 0 for

Griffey Corporation has 40,000 of accumulated EP and incurs a loss of $30,000 for the year. The loss
accrues ratably through the year. On June 1, Griffey Corporation distributes 40,000 to its sole
shareholder, Ken. How much of the distribution will get dividend treatment? How much of the
distribution will reduce Kens basis in his Griffey stock?
Dividend income: $____________________
Reduction in stock basis: $______________QUESTION 10(CHAPTER 19)
Denny is a shareholder in Urban Corporation. Urban Corporation decides to redeem some of Denny's
stock. Prior to the redemption, Denny owns 58 shares (out of 100 total shares outstanding). Denny
originally paid $10 per share for the stock. Urban Corporation pays Denny $820 to redeem 17 of his
shares.
(a) What is Denny's percentage ownership of Urban Corporation after the redemption?
(b) How much gain/income will Denny report as a result of the redemption?
(c) What type of income will this be? Please circle the correct response.
dividend
capital gain
ordinary income
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