Reference no: EM132709710

Question - At the beginning of the current year, Scott Inc. has 131,000 shares of common stock outstanding with PUC $1,473,750 (Average $11.25 per share). During the current year, a creditor holding $505,000 of the Company's debt agrees to accept 43,000 newly issued common shares of the Company in exchange for settlement of the debt obligation. At the time of this exchange, the shares are trading at $12.05 per share. Subsequent to the exchange, Mr. Scott, who had purchased 7,000 Scott Inc. Shares two year ago at the rate of $12.50 per shares, sells all 7,000 shares to his friend for $14.36 per share. Calculate the taxable capital gain on the sale of shares by Mr. Scott.