items of income or loss in 2019 and does not itemized her deductions, what are the tax consequences to Carol if the redemption of her shares does qualify for sale or exchange treatment under §302? a, If her shares do qualify for sale or exchange, then the tax consequences would be the lesser of the amount paid by the corporation or the percentage of the shares redeemed multiplied by the total amount of E & P. In this case the amount would be $250,000 (2) DEF Corporation has 10,000 shares of voting common stock outstanding. Ann owns 7,000 shares and Ben owns 3,000 shares. Ann and Ben attended the same college, but they are not related. Which of the following transactions would constitute a redemption satisfying the requirements of §302(a): (a) DEF Corporation acquires 3,200 shares from Ann (b) DEF Corporation acquires 4,000 shares from Ann (c) DEF Corporation acquires 1,000 shares from Ben. (d) DEF Corporation acquires 5,100 shares from Ann and 1,000 shares from Ben at the same time. (e) Assume that DEF acquired 4,200 shares from Ann and nine (9) months later redeemed 1,800 shares from Ben. 1. 三 1 of 2 588 words
items of income or loss in 2019 and does not itemized her deductions, what are the tax consequences to Carol if the redemption of her shares does qualify for sale or exchange treatment under §302? a, If her shares do qualify for sale or exchange, then the tax consequences would be the lesser of the amount paid by the corporation or the percentage of the shares redeemed multiplied by the total amount of E & P. In this case the amount would be $250,000 (2) DEF Corporation has 10,000 shares of voting common stock outstanding. Ann owns 7,000 shares and Ben owns 3,000 shares. Ann and Ben attended the same college, but they are not related. Which of the following transactions would constitute a redemption satisfying the requirements of §302(a): (a) DEF Corporation acquires 3,200 shares from Ann (b) DEF Corporation acquires 4,000 shares from Ann (c) DEF Corporation acquires 1,000 shares from Ben. (d) DEF Corporation acquires 5,100 shares from Ann and 1,000 shares from Ben at the same time. (e) Assume that DEF acquired 4,200 shares from Ann and nine (9) months later redeemed 1,800 shares from Ben. 1. 三 1 of 2 588 words
Chapter18: Corporations: Organization And Capital Structure
Section: Chapter Questions
Problem 35P
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Question
Transcribed Image Text:items of income or loss in 2019 and does not itemized
her deductions, what are the tax consequences to Carol if the redemption of her
shares does qualify for sale or exchange treatment under §302?
a, If her shares do qualify for sale or exchange, then the tax consequences would be
the lesser of the amount paid by the corporation or the percentage of the shares
redeemed multiplied by the total amount of E & P. In this case the amount
would be $250,000
(2) DEF Corporation has 10,000 shares of voting common stock outstanding. Ann owns 7,000
shares and Ben owns 3,000 shares. Ann and Ben attended the same college, but they are not
related. Which of the following transactions would constitute a redemption satisfying the
requirements of §302(a):
(a) DEF Corporation acquires 3,200 shares from Ann
(b) DEF Corporation acquires 4,000 shares from Ann
(c) DEF Corporation acquires 1,000 shares from Ben.
(d) DEF Corporation acquires 5,100 shares from Ann and 1,000 shares from Ben at the
same time.
(e) Assume that DEF acquired 4,200 shares from Ann and nine (9) months later
redeemed 1,800 shares from Ben.
1.
三
1 of 2
588 words
Expert Solution
Step 1: What is Sec 302
When a corporate entity purchase its own shares/stocks from its shareholders either during lifetime of shareholder or after the death of the shareholder, then Section 302 of Internal Revenue Code of 1954 comes into picture to decide whether a reduction is qualifying under this section and will be treated as taxable sale or taxable exchange for calculating capital gain.
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