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How much income and what type will he have to report

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Problem - Mark, Mark's sons Bill and Alan, and Mark's brother Dan own MBAD Co. They own the following

Common

Mark 550

Bill 400

Alan 350

Dan 700

Mark has reached the age of 65 and wants to retire. However, he will remain on the Board of Directors. The company has been extremely profitable and has earnings and profits in excess of $1million. The company plans to redeem Mark's common stock for $300,000 (it's fair market value). His basis in the stock is $65,000.

a. Will the redemption qualify as a sale under Section 302(b)(1), (b)(2) or (b) (3)?

b. How much income and what type will Mark have to report on this transaction?

c. If Mark decided not to have anything to do with the company after the redemption, how much income and what type will he have to report?

Reference no: EM132865885

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