Julio is in the 33% tax bracket. He acquired 2,000 shares of stock in Gray Corporation seven years ago costing $50 per share. In the current year, Julio received a payment of $150,000 from Gray Corporation in exchange for 1,000 of his shares in Gray. Gray has E & P of $1 million. What tax liability would Julio incur on the payment in each of the following situations? Assume that Julio has no capital losses.

a. The stock redemption qualifies for sale or exchange treatment.

b. The stock redemption does not qualify for sale or exchange treatment.

Assume that Julio has a capital loss carryover of $ 50,000 in the current tax year. Julio has no other capital gain transactions during the year. What amount of the capital loss may Julio deduct in the current year in the following situations?

The payment from Gray Corporation is a qualifying stock redemption for tax purposes.

The payment from Gray is a non-qualified stock redemption for tax purposes.

If Julio has the flexibility to structure the transaction as described in either part (a) or (b), which form would he choose?