How might karen have structured the transaction in part a

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During the current year, Karen sells her entire interest in Central Corporation common stock for $22,000. She is the sole shareholder, and originally organized the corporation several years ago by contributing $89,000 in exchange for her stock, which qualifies as Sec. 1244 stock. Since its incorporation, Central has been involved in the manufacture of items that protect personal computers from static electricity. Unfortunately, this market is extremely competitive, and Central Corporation incurs substantial losses throughout its existence.

a. Assuming Karen is single, what are the amount and character of the loss recognized on the sale of the Central Corporation stock?

b. Assuming Karen is married and files a joint return, what are the amount and the character of the loss recognized on the sale of the Central Corporation stock?

c. How would your answer to Part a change if Karen had originally purchased the stock from another shareholder rather than organizing the corporation?

d. How might Karen have structured the transaction in Part a to receive a greater tax advantage? 

Reference no: EM13987128

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