Determine whether the redemption can qualify for sale

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Problem - Cyan Corporation (E & P of $700,000) has 4,000 shares of common stock outstanding. The shares are owned as follows: Angelica, 2,000 shares; Dean (Angelica's son), 1,500 shares; and Walter (Angelica's uncle), 500 shares. In the current year, Cyan redeems all of Angelica's shares. Determine whether the redemption can qualify for sale or exchange treatment under the complete termination redemption rules in each of the following independent circumstances.

Required -

a. Angelica remains as a director of Cyan Corporation.

b. Three years after the redemption, Angelica loans $100,000 to Cyan Corporation and receives in return a two-year note receivable.

c. Dean replaces Angelica as president of Cyan Corporation.

d. Six years after the redemption, Angelica receives 250 shares in Cyan as a gift from Walter.

Reference no: EM132646766

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