What the distribution is taxed as a

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During the current year, Gnatcatcher, Inc., (E & P of $1,000,000) distributed $200,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 32% tax bracket, and each had a $45,000 basis in the redeemed stock. Assume taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%.

Question a. Assume that the distribution to Brandi is a qualifying stock redemption.

The distribution is taxed as a______(dividend/sale or exchange) and Brandi's tax liability on the distribution is $_____

Question b. Assume that the distribution to Yuen is a nonqualified stock redemption.

The distribution is taxed as a____(dividend/sale or exchange) and Yuen's tax liability on the distribution is

Reference no: EM132622874

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