What are the tax consequences of the preferred stock

Reference no: EM13531380

1- Larry has 100,000 shares outstanding that are worth $10 per share. It uses 32% of its stock, plus $80,000 to acquire Price Corporation in a Type A reorganization. Price's assets are valued at $400,000, and its accumulated earnings and profits are $25,000 at the time of the reorganization. The Larry shares and cash are distributed to the Price shareholders as follows. Jake (owning 62.5% of Price) receives 18,000 shares (value $180,000) and $70,000. Kara (owning 37.5% of Price) receives 14,000 shares (value $140,000) and $10,000. Jake and Kara each recognize gains to the extent of the cash they received. What is the character of Jake and Kara's gains?

2 - Fred is the sole shareholder of Ponce Corporation, having a basis of $90,000 in 1,000 shares of Ponce common stock. Last year, Ponce (E & P of $500,000) issued a dividend of 2,000 shares of preferred stock to Fred. On the date of distribution, the fair market values per share of the common and preferred stocks were $160 and $20, respectively. In the current year, Ponce (E & P of $720,000) redeems all of Fred's preferred stock for its fair market value of $40,000.
(I) What are the tax consequences of the preferred stock dividend to Fred?
(II) What are the tax consequences of the stock redemption to Fred?
(III) What are the tax consequences of the stock redemption to Ponce?

Reference no: EM13531380

Questions Cloud

Evaluate the maximum torque on the wire : A wire is formed into a circle having a diameter of10.7cm and is placed in a uniform magnetic field of3.16mT. Find the maximum torque on the wire

Sizes of proteins found in the ribosomes of bacterial cells : Describe the structure and function of promoters. Design a method to extract, purify, and determine the number and sizes of proteins found in the ribosomes of bacterial cells. Explain how chloroplasts use chemiosmosis to drive the synthesisof sugars..

How to calculate the density of the unknown gas : If the density of an unknown gas is .0985 g/l at 25 degrees Celsius and 725 torr, calculate the density of the unknown gas at 48 degrees celcius and 740 torr

Find what is the maximum mass can be : A 68.0 patient is suspended in a raised hospital bed (angle is 50 degrees). What is the maximum mass can be without the patient sliding up the bed

What are the tax consequences of the preferred stock : What are the tax consequences of the preferred stock dividend to Fred?

Find the electric flux through a spherical surface : A hollow, conducting sphere with an outer radius of 0.258m and an inner radius of 0.210m has a uniform surface charge density of +6.68×10?6C/m^2. What is the electric flux through a spherical surface just inside the inner surface of the sphere

Explain a negative concentration for the analyte : Suppose that you carry out an analytical procedure to generate a linear calibration curve like that shown in the figure below. Then you analyze an unknown and find an absorbance that gives a negative concentration for the analyte Select the true s..

Acey and deucy formed the acey-deucy partnership : Acey and Deucy formed the Acey-Deucy Partnership

Explain an instrument detection limit : What is the difference between an instrument detection limit and a method detection limit? (Select all that apply.) 1.There is more variability in the instrument detection limit, so it should be higher than the method detection limit.

User Account

All Pages