Solved by verified expert :530. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question MC
Five years ago, Eleanor transferred property she had used in her sole
proprietorship to Blue Corporation for 1,000 shares of Blue Corporation in a
transaction that qualified under § 351. The assets had a tax basis to her of
$100,000 and a fair market value of $270,000 on the date of the transfer. In
the current year, Blue Corporation (E & P of $800,000) redeems 250 shares
from Eleanor for $220,000 in a transaction that does not qualify for sale or
exchange treatment. With respect to the redemption, Eleanor will have a:
a.
$195,000 capital gain.
b. $220,000 capital gain.
c. $195,000 dividend.
d. $220,000 dividend.
e. None of the above.
531. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 46
Five years ago, Eleanor transferred property she had used in her sole
proprietorship to Blue Corporation for 1,000 shares of Blue Corporation in a
transaction that qualified under § 351. The assets had a tax basis to her of
$100,000 and a fair market value of $270,000 on the date of the transfer. In
the current year, Blue Corporation ( E & P $800,000) redeems 250 shares
from Eleanor for $220,000 in a transaction that qualifies for sale or exchange
treatment. With respect to the redemption, Eleanor will have a:
a.
$195,000 capital gain.
b. $220,000 capital gain.
c. $195,000 dividend.
d. $220,000 dividend.
e. None of the above.
532. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 47
Finch Corporation distributes property (basis of $140,000, fair market value of
$200,000) to a shareholder in a distribution that is a qualifying stock
redemption. The property is subject to a liability of $90,000, which the
shareholder assumes. The basis of the property to the shareholder is:
a.
$0.
b. $50,000.
c. $110,000.
d. $140,000.
e. None of the above.
533. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 48
Ember Corporation has 500 shares of stock outstanding: Zoe owns 170 shares,
Leticia owns 95 shares, and Samuel owns 55 shares. Sage Partnership owns the
other 180 shares in Ember Corporation. Zoe, Leticia, and Samuel, all unrelated,
are equal partners of the Sage Partnership. In applying the stock attribution
rules under § 318:
a.
Zoe owns, directly and indirectly, 350 shares in Ember Corporation.
b. Samuel owns, directly and indirectly,
115 shares in Ember Corporation.
c. Leticia owns, directly and
indirectly, 95 shares in Ember Corporation.
d. Sage Partnership owns, directly and
indirectly, 180 shares in Ember Corporation.
e. None of the above.
534. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 49
Kite Corporation has 1,000 shares of stock outstanding. Kent owns 250 shares,
Kent’s father owns 150 shares, Kent’s brother owns 250 shares, and Kent’s son
owns 50 shares. Plover Corporation owns the other 300 shares in Kite
Corporation. Kent owns 60% of the stock in Plover Corporation. Applying the §
318 stock attribution rules, how many shares does Kent own in Kite Corporation?
a.
250.
b. 400.
c. 450.
d. 630.
e. None of the above.
535. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 50
Cardinal Corporation has 1,000 shares of common stock outstanding. John owns
400 of the shares, John’s father owns 300 shares, John’s daughter owns 200
shares, and Redbird Corporation owns 100 shares. John owns 70% of the stock in
Redbird Corporation. How many shares is John deemed to own in Cardinal
Corporation under the attribution rules of § 318?
a.
400.
b. 600.
c. 700.
d. 1,000.
e. None of the above.
536. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 51
Which of the following is an incorrect
statement regarding the application of the § 318 stock attribution rules?
a.
Stock owned by a partner is deemed to be owned in full by a partnership.
b. Stock owned by a beneficiary is
deemed to be owned in full by an estate.
c. An individual is deemed to own the
shares owned by his or her spouse, children, grandchildren, or parents.
d. Stock owned by a corporation is
deemed to be owned proportionately by any shareholder owning 50% or more of the
corporation’s stock.
e. None of the above.
537. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 52
Currently, Brown Corporation (E & P of $800,000) has 1,000 shares of common
stock outstanding. Pat owns 200 shares. His wife owns 400 shares, his daughter
owns 100 shares, and his father owns 300 shares. Two years ago, Pat transferred
$30,000 to Brown Corporation in exchange for 100 newly issued shares of
nonvoting preferred stock. In the current year, Brown Corporation redeems Pat’s
preferred stock for $50,000, its fair market value. With respect to the
distribution in redemption of the preferred stock:
a.
Pat has dividend income of $20,000.
b. Pat has dividend income of $50,000.
c. Pat has a long-term capital gain of
$20,000.
d. Pat has a long-term capital gain of
$50,000.
e. None of the above.
538. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 53
Hazel, Emily, and Frank, unrelated individuals, own all of the stock in Wren
Corporation (E & P of $1.2 million) as follows: Hazel, 1,300 shares; Emily,
400 shares; and Frank, 300 shares. Wren redeems 300 of Hazel’s shares (basis of
$60,000) for $450,000. With respect to the distribution in redemption of the
stock:
a.
Hazel has a capital gain of $390,000.
b. Hazel has dividend income of
$450,000.
c. Hazel has dividend income of
$390,000.
d. Hazel has a capital gain of $450,000.
e. None of the above.
539. CHAPTER
6—CORPORATIONS: REDEMPTIONS AND LIQUIDATIONS Question 54
Lucinda owns 1,100 shares of Blackbird Corporation stock at a time when
Blackbird has 2,000 shares of stock outstanding. The remaining shareholders are
unrelated to Lucinda. What is the minimum number of shares Blackbird must
redeem from Lucinda so that the transaction will qualify as a disproportionate
redemption?
a.
880.
b. 484.
c. 393.
d. 220.
e. None of the above.
