Will julie redemption of stock receive sale

Assignment Help Financial Accounting
Reference no: EM132957880

Question - Rare Corporation has accumulated E&P of $2,000,000. The corporation has 1,000 shares of common stock outstanding and owned by unrelated parties as follows: Julie, 500 shares and Jim, 500 shares. Julie and Jim each paid $200 per share for Rare stock 15 years ago. At the end of the year, Rare distributes securities (fair market value $250,000 and adjusted basis of $140,000) to Julie in redemption of 200 share of her stock.

-Will Julie's redemption of stock receive sale and exchange treatment or will it be treated as a distribution of property? Your answer should include numerical calculations.

-How much tax will Julie owe as a result of the redemption? Assume Julie is in the 37% tax bracket.

-What impact does this redemption have on the tax liability of Rare Corporation (if any)?

-Would your answer for Julie be different if Julie and Jim were husband and wife? Explain how this relationship would (or would not) affect the tax treatment of the redemption.

Reference no: EM132957880

Questions Cloud

How much cash did the partners set aside : In the first month of liquidation, certain assets were sold for P192,000. How much cash did the partners set aside for future liquidation expenses
Explain how managers can privately benefit : Explain how managers can privately benefit from choosing equity method over consolidation when the determination of control and significant influence is unclear
What is the quarterly lease payment : The implicit rate is unknown. Payments are quarterly and start at the commencement of the lease. What is the quarterly lease payment
What is abc financial leverage : Question - ABC has ROE of 20% and return on total assets of 8% and total asset turnover of 2.0. What is ABC's financial leverage
Will julie redemption of stock receive sale : Will Julie's redemption of stock receive sale and exchange treatment or will it be treated as a distribution of property
Determine the dividends per share for preferred stock : Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero.
What is the size of current assets with common size analysis : ABC has total liabilities of $40M, total stockholder's equity of $80M and non-current assets of $90M. What is size of current assets with common size analysis
What the poppy cost of goods sold for this year : In addition, a purchase of merchandise costing $20,600 was incorrectly recorded as a $2,060 purchase. What the Poppy cost of goods sold for this year
Calculate tax credit on disposal : Reversing Rapids has a tax rate of 30%. The asset is sold at the end of four years for $14,267. Calculate tax credit on disposal

Reviews

Write a Review

Financial Accounting Questions & Answers

  What called the risk involved in the case example

Of the 100 transactions, materiality is set at 5% or 5 transactions. The auditor took a sample of 40 transactions,What called the risk involved in case example?

  How many shares will the original highest bidder receive

ABC Corporation received bids from Gavin -11,000 shares , Cookie- 8,000 shares and Bella- 10,000. How many shares will the original highest bidder receive

  What would be the adjusting entry needed to account

If a company is using the Allowance method, and the Balance Sheet method, what would be the adjusting entry needed to account for uncollectible accounts?

  Post general ledger to relevant accounts

General journal entries to record the bad debts and allowance adjustment. Bad debts to be written off are $3,630 including GST.

  Complete with respect to conversion costs

Walborn Corporation uses the weighted-average method in its process costing system. The beginning work in process inventory in a particular department consisted of 12,000 units, 100% complete with respect to materials cost and 30% complete with respe..

  Compute the business income

Compute the business income. Compute their adjusted gross income. Compute their itemized deductions. Compute their taxable income.

  What is the current price of stock for merriweather company

The company paid a dividend of $1.20 last year. If the required rate of return is 14 percent, what is the current price of this stock?

  How many years will it be until the two accounts

How many years will it be until the two accounts have the same amount in them if you do not withdraw any money? You have $1,225 in a savings account

  What is the balance sheet presentation for each independent

What is the balance sheet presentation for each independent case provided above In each case, the company successfully negotiated the financing

  A identify the steps in evaluating the taxable income of a

a. identify the steps in evaluating the taxable income of a trust or estate.b. show the uses and implication of

  How will these differences in accounting for brands

What principles of accounting for intangibles would cause Hilton to record brands as assets while Marriott does not? How will these differences in accounting for brands generally affect the net income and return on assets of these two competitors..

  How depreciation is to be allocated in each of accounting

How depreciation is to be allocated in each of the accounting period for the four years using reducing balance method of depreciation.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd