Compute the distribution is taxed a dividend

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Question - During the current year, Gnatcatcher, Inc., (E & P of $1,250,000) distributed $535,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 32% tax bracket, and each had a $133,750 basis in the redeemed stock. Assume taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%.

Assume that the distribution to Yuen is a nonqualified stock redemption. Compute the distribution is taxed a dividend and Yuen's tax liability?

Reference no: EM132557479

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