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40. Wildcat Corporation reports current E&P of neg...

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40. Wildcat Corporation reports current E&P of negative $200,000 in 20X3 and accumulated E&P at the beginning of the year of $100,000. Wildcat distributed $300,000 to its sole shareholder on December 31, 20X3. How much of the distribution is treated as a dividend in 20X3? A. $0 B. $100,000 C. $200,000 D. $300,000 23. Comet Company is owned equally by Pat and his sister Pam, each of whom hold 100 shares in the company. Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 50 of her shares for $1,000 per share on December 31, 20X3. Pam's income tax basis in each share is $500. Comet has total E&P of $250,000. What are the tax consequences to Pam as a result of the stock redemption? A. $25,000 capital gain and a tax basis in each of her remaining shares of $500. B. $25,000 capital gain and a tax basis in each of her remaining shares of $100. C. $50,000 dividend and a tax basis in each of her remaining shares of $100. D. $50,000 dividend and a tax basis in each of her remaining shares of $50. 24. Comet Company is owned equally by Pat and his sister Pam, each of whom hold 100 shares in the company. Comet redeems 50 of Pam's shares on December 31, 20X3, for $1,000 per share in a transaction that Pam treats as an exchange for tax purposes. Comet has total E&P of $250,000 on December 31, 20X3. What are the tax consequences to Comet as a result of the stock redemption? A. No reduction in E&P as a result of the exchange. B. A reduction of $50,000 in E&P as a result of the exchange. C. A reduction of $62,500 in E&P as a result of the exchange. D. A reduction of $125,000 in E&P as a result of the exchange.

 

Paper#9256 | Written in 18-Jul-2015

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