Malcolm is an S corporation shareholder with a $120,000 basis in his stock. Malcolm owns 20% of the corporation. The corporation decides to redeem Malcolms interest by distributing to him $140,000 of securities with a basis to the S corporation of $100,000.

1) As a result of this decision, what is Malcolms basis in his S corporation stock immediately prior to receiving these securities? NOTE: Assume there are two steps here: the corporations distribution of the securities and the shareholders receipt of them. This question addresses the first step and #2 addresses the second step.

2) Refer to the data for Question #1. What is Malcolms gain or loss on receiving the securities in redemption of his S corporation stock?

3) Refer to the data for Question #1. What is his basis in the securities received in full redemption of his stock?