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Determine the tax consequences to Carl and Red

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Question - Red Corporation has 1,000 shares of stock outstanding and is owned equally by the following individuals:

Al 200 shares

Bob 200 shares

Carl 200 shares

Cindy (Carl's wife) 200 shares

Dawn 200 shares

Red has E&P of $2,500,000

Red redeems Carl's 200 shares for property worth $1,000,000 with a basis to Red of $250,000.

Carl will stay on the Board of Directors after the redemption.

Required - Determine the tax consequences to Carl and Red?

Reference no: EM132874251

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