Question
In 2011, Francine transferred property she had used in her sole proprietorship to Charcoal Corporation for 2,000 shares of Charcoal Corporation in a transaction that
In 2011, Francine transferred property she had used in her sole proprietorship to Charcoal Corporation for 2,000 shares of Charcoal Corporation in a transaction that qualified under 351. At the time of formation, the assets she transferred had a tax basis to her of $400,000 and a fair market value of $700,000. In 2019, Charcoal Corporation (total E & P of $250,000) redeems 600 shares from Francine for $260,000. With respect to the redemption, which of the following is correct:
Options
| A | If this is qualified redemption, Francine will have a $140,000 capital loss |
| B | If this is a qualified redemption, Francine will have a $140,000 capital gain |
| C | If this is a qualified redemption, Francine will have a $260,000 capital gain. |
| D | If this is a non-qualified redemption, Francine will have a $260,000 dividend |
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