Question
Zorro Corporation distributed $50,000 cash to Theodore in redemption of all of his stock. Theodores basis in the stock is $12,500 and his pro rata
Zorro Corporation distributed $50,000 cash to Theodore in redemption of all of his stock. Theodores basis in the stock is $12,500 and his pro rata share of earnings and profits is $25,000. Assume all the requirements for a redemption are met. The effect on Theodores taxes is:
a. $12,500 capital gain.
b. $12,500 dividend.
c. $37,500 capital gain.
d. $0.
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Financial Accounting Theory and Analysis Text and Cases
Authors: Richard G. Schroeder, Myrtle W. Clark, Jack M. Cathey
10th edition
470646284, 978-0470646281
