Jamestown, Inc. is family-owned C-corporation whose stock is not traded on an exchange. Jamestown, Inc. stock is owned as follows: · Virginia 6,000 shares · Miles 8,000 shares · John 2,000 shares · Hope 4,000 shares · Z corporation 3,000 shares · VM partnership 2,000 shares · Total shares issued & outstanding 25,000 shares Virginia would like to redeem 3,000 shares of her stock. The stock has a fair market value of $500,000 and Virginia has a basis of $150/share for her stock. Here are the relationships Virginia has with the other shareholders of Jamestown, Inc.: · Miles is Virginia’s older brother · John is Virginia’s father · Hope is Virginia’s sister · Virginia owns 60% of the stock of Z corporation · Virginia has a partnership interest of 30% in VM partnership. a. How many shares of stock is Virginia deemed to own in Jamestown, Inc. b. Assume that Virginia is in the 37% tax bracket. How much tax would Virginia owe if the transaction above (i.e. the redemption of 3,000 share of her Jamestown stock) occurs? c. You are Virginia’s tax advisor and you know that Virginia would like to minimize her tax liability. In addition, Virginia has a long-term capital loss carryforward of $20,000. Could you offer another option to Virginia? Be as specific as possible in explaining the tax implications of your plan.
Jamestown, Inc. is family-owned C-corporation whose stock is not traded on an exchange. Jamestown, Inc. stock is owned as follows:
· Virginia 6,000 shares
· Miles 8,000 shares
· John 2,000 shares
· Hope 4,000 shares
· Z corporation 3,000 shares
· VM
· Total shares issued & outstanding 25,000 shares
Virginia would like to redeem 3,000 shares of her stock. The stock has a fair market value of $500,000 and Virginia has a basis of $150/share for her stock. Here are the relationships Virginia has with the other shareholders of Jamestown, Inc.:
· Miles is Virginia’s older brother
· John is Virginia’s father
· Hope is Virginia’s sister
· Virginia owns 60% of the stock of Z corporation
· Virginia has a partnership interest of 30% in VM partnership.
a. How many shares of stock is Virginia deemed to own in Jamestown, Inc.
b. Assume that Virginia is in the 37% tax bracket. How much tax would Virginia owe if the transaction above (i.e. the redemption of 3,000 share of her Jamestown stock) occurs?
c. You are Virginia’s tax advisor and you know that Virginia would like to minimize her tax liability. In addition, Virginia has a long-term capital loss carryforward of $20,000. Could you offer another option to Virginia? Be as specific as possible in explaining the tax implications of your plan.
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