Reference no: EM132465336

TAX 991 Corporate Tax Assignment - Pennsylvania State University, USA

Problem - C is interested in redeeming some shares that she owns in Fisher Corporation and would like to get capital gain treatment for the redemption. She asks your advice on the minimum number of shares she needs to redeem to achieve this result.

Facts:

Fisher Corp is owned as follows:

C - 20 shares

T (her husband) - 20 shares

S (her sister) - 20 shares

Gunner Partnership - 20 shares

Anabelle Corp (a C Corporation) - 20 shares

Gunner Partnership is owned as follows:

C - 30%

T - 30%

S - 40%

Annabelle Corporation is owned as follows:

C- 20%

T- 20%

S - 60%

Required -

Question 1 - Considering the application of the constructive ownership rules of Section 318, how much stock does C currently own directly and indirectly in Fisher Corp?

Question 2 - Is it possible for C to get the capital gain treatment she desires using section 302(b)(2)? If so, how many shares would she need to redeem?

Question 3 - If she redeems all 20 shares that she owns directly in Fisher Corp., could she qualify for sale of exchange treatment under Section 302(b)(3)? Explain.