Question
Liam, a shareholder in Lager, Inc., (a C corporation), would like to sell 800 of his shares of stock in Lager. Since Lager is not
Liam, a shareholder in Lager, Inc., (a C corporation), would like to sell 800 of his shares of stock in Lager. Since Lager is not traded on an exchange, the only way to sell is the stock is by having Lager redeem the stock. The fair market value of the 800 shares of stock is $200,000. Liam purchased the stock 10 years ago for $95/share. Lager has E&P of $700,000. The corporate stock in Lager is held as follows:
- Liam 2,000 shares
- Jennifer (Liam’s sister) 2,000 shares
- Katherine (Liam’s mother) 2,000 shares
- Beer Partnerships (Liam has a 30% interest) 4,000 shares
10,000 shares
How do you calculate the 800 shares of Liam’s stock to be treated as a qualified stock redemption or will it be treated as a distribution?
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Principles of Corporate Finance
Authors: Richard Brealey, Stewart Myers, Franklin Allen
13th edition
1260013901, 1260565553, 978-1260013900
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