Determine the tax consequences to Ricky

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Problem - Ricky owns stock in Dove Corporation. His adjusted basis for the stock is $90,000. During the year, he receives a distribution from the corporation of $75,000 that is labeled a return of capital (i.e., Dove has no earnings and profits).

a. Determine the tax consequences to Ricky.

b. Assume instead that the amount of the distribution is $150,000. Determine the tax consequences to Ricky.

c. Assume instead in part (a) that the $75,000 distribution is labeled a taxable dividend (i.e., Dove has earnings and profits of at least $75,000).

Reference no: EM132670482

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