What income tax liability would julio incur on the payment

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Problem 1: Julio Gonzales is in the 32% tax bracket. He acquired 1,000 shares of stock in Gray Corporation seven years ago at a cost of $180 per share. In the current year, Julio received a payment of $135,000 from Gray Corporation in exchange for 500 of his shares in Gray. Gray has E & P of $6,000,000. What income tax liability would Julio incur on the $135,000 payment in each of the following situations? Assume that Julio has no capital losses and taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%.

a. The stock redemption qualifies for sale or exchange treatment.

b. The stock redemption does not qualify for sale or exchange treatment.

Reference no: EM132789656

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