Question
Tangerine, Inc. has 2,000 shares of stock authorized and 1,000 shares outstanding. The shares are owned by Madison (700 shares) and Jessica (300 shares). Madison's
Tangerine, Inc. has 2,000 shares of stock authorized and 1,000 shares outstanding. The shares are owned by Madison (700 shares) and Jessica (300 shares). Madison's adjusted basis for her stock is $100,000 and Jessica's adjusted basis for her stock is $50,000. Tangerine's earnings and profits are $100,000. Tangerine redeems 150 of Jessica's shares for $50,000. Determine the amount of Jessica's recognized gain (1) if she is Madison's mother and (2) if they are unrelated.
a. $0 and $0.
b. $50,000 and $50,000.
c. $50,000 and $-0-.
d. $50,000 and $25,000.
e. None of the above.
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