h. Yes. If Johns 100 shares represented one third of Jamaicas outstanding shares, unrelated parties owned the remaining 200 shares, and Jamaica exchanged all of Johns shares for each of the properties listed, the distribution would be treated as a redemption in complete termination of Johns interest. Consequently, the following tax consequences would ensue.

From the corporations perspective, Jamaica would increase its E&P by the excess of the FMV of any appreciated property distributed over that propertys E&P adjusted basis. It then would reduce its E&P by one third (i.e., 100 shares/300 shares), not to exceed the actual distribution amount. Any distribution exceeding the one-third amount would reduce Jamaicas tax basis paid-in capital.

From the shareholders perspective, John would recognize gain or loss equal to difference between the distribution amount and the aggregate adjusted bases of the stock surrendered. The character of the gain or loss would depend on the nature of the distributed property in Johns hands (i.e., how he used such property). Johns basis in any noncash property received would be the propertys FMV. The holding period for that property would be the day after the exchange date.

i. Yes. If John were an investor, treating the distribution as a sale would be preferable to treating the distribution as a dividend because John could offset his other capital gains with any losses recognized in the sale, and his other capital losses with any gains recognized in the sale. Also, with sale treatment, he recognizes only the gain or loss and not the entire amount of the distribution as a dividend.

Please give me some specific reasons and background knowledge behind the answers h and i.

John owns all 100 shares of stock in Jamaica Corporation, which has $100,000 of current E&P. John would like to receive a $50,000 distribution from the corporation. Jamaica owns several assets that it could distribute to John. What are the tax consequences of Jamaica's distributing each of the following assets? Jamaica has a 21% tax rate and, un- less stated otherwise, its bases for E&P and taxable income purposes are the same. a. $50,000 cash. b. 100 shares of XYZ stock purchased two years ago for $10,000 and now worth $50,000. c. 100 shares of ABC stock purchased one year ago for $72,000 and now worth $50,000. d. Equipment purchased four years ago for $120,000 that now has a tax adjusted basis of $22,000 and an E&P adjusted basis of $40,000. John would assume a liability of $31,000 on the equipment. The equipment is now worth $81,000. c. An installment obligation with a face value of $50,000 and a basis of $32,000. Jamaica acquired this obligation three years ago when it sold land held as an investment. f. Would your answers in Parts a-c change if Jamaica redeems 50 of John's shares for cach of the properties listed? g. Based on the foregoing results, which distribution would you recommend? Which distribution(s) should be avoided? h. Would your answers in Parts a-e change if John's 100 shares represented one third of Jamaica's outstanding shares, unrelated parties owned the remaining 200 shares, and Jamaica exchanged all of John's shares for each of the properties listed? i. If John were an investor, would treating the distribution as a sale be preferable to treat- ing the distribution as a dividend? Why or why not