Q 4. DATE: December 2, 2021FROM: Astia Jackson.TAX FILE MEMORANDUMSUBJECT: Crane CorporationToday I advised the president of Crane Corporation regarding his November 25 letter. Crane Corporation had 2,000 shares ofstock outstanding. It redeemed 500 shares for $370,000, when it had paid-in capital of $300,000 and E & P of $1,200,000. Theredemption qualifies for sale or exchange treatment for the shareholder. Crane incurred $13,000 of accounting and legal fees withrespect to the redemption transaction and $18,500 of interest expense on debt incurred to finance the redemption.At Issue: What is the change in Crane Corporation's E & P as a result of the redemption? Also, are the redemption expendituresdeductible by Crane?Conclusion: Under § 312(n)(7), the E & P account of a corporation isby a qualifying stock redemption inan amount not in excess of the ratable share of the E & P of the distributing corporation attributable to the stock redeemed. SinceCrane Corporation redeemedCode 5 162(k) specifically% of its stock, the change in E & P is sa deduction for redemption expenditures. "

As per question Legal fees are not deductible against redemptions, but you might be able to if the…

oday I advised the president of Crane Corporation regarding his November 25 letter. Crane Corporation had 2,000 shares of stock outstanding. It redeemed 500 shares for $370,000, when it had paid-in capital of $300,000 and E & P of $1,200,000. The edemption qualifies for sale or exchange treatment for the shareholder. Crane incurred $13,000 of accounting and legal fees with respect to the redemption

oday I advised the president of Crane Corporation regarding his November 25 letter. Crane Corporation had 2,000 shares of stock outstanding. It redeemed 500 shares for $370,000, when it had paid-in capital of $300,000 and E & P of $1,200,000. The edemption qualifies for sale or exchange treatment for the shareholder. Crane incurred $13,000 of accounting and legal fees with respect to the redemption

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter6: Corporations: Redemptions And Liquidations

Section: Chapter Questions

Problem 65P

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