What are the tax consequences to Teal Corporation

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Problem - Teal Corporation, with E & P of $2,000,000, distributes property with a basis of $150,000 and a fair market value of $400,000 to Grace. She owns 15% of the outstanding Teal shares.

a. What are the tax consequences to Teal Corporation and to Grace if the distribution is a nonqualified stock redemption?

b. What are the tax consequences in part (a) if Grace is a corporation?

c. What are the tax consequences to Teal Corporation and to Grace if the distribution is a qualifying stock redemption? Assume that Grace's basis in the redeemed shares is $90,000.

d. What are the tax consequences in part (c) if Grace is a corporation?

e. If the parties involved could choose from among the preceding options, which would they choose? Why?

Reference no: EM132646744

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