Tax Accounting Review

Mary owns 20% of a closely held family corporation. The remaining shares are held by his parents. Manny decides he no longer wants an interest in the corporation and his entire interest is bought out by the corporation. Which statement is true from the list below? A) The payment of his share will be treated as all dividend income B) This is a qualified redemption as it stands C) This will be treated as a qualified redemption if he agrees to not acquire a prohibited interest (shareholders, officer, director, employee) for 10 years after the redemption D) None of the above 6) Gabriella and Juanita form Luster Corporation. Gabriella transfers cash of $40,000 and property with a basis of $5,000 and a market value of $20,000 for 6,000 shares of stock Juanita contributes services worth $15,000 and cash of 5,000 for 2,000 shares of stock. These are the only contributions to the corporation at formation. Select the most accurate statement for the treatment of this transaction. A) Both transfers are taxable B) Both transfers are tax free. C) Gabriella's transfer is tax free. Juanita's receipt of stock for services is taxable but the transferors meet the control requirement because Juanita contributes a sufficient amount of property in the transaction D) None of the above