50 per share. Nail had total E&P of $8,485,000 at the time of the distribution. a. What are the amount and character (capital gain or dividend) of any income or gain recognized by Rusty because of the partial liquidation? Capital gain/ Dividend ./ per share b. Assuming Nail made no other distributions to Rusty during the year, by what amount does Nail reduce its total E&P because of the partial liquidation?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Nail Corporation made a distribution of $589, 110 to Rusty in partial liquidation of the company on December 31 of this year. Rusty, an individual, owns 100 percent of Nail Corporation. The
distribution was in exchange for 50 percent of Rusty's stock in the company. At the time of the distribution, the shares had a fair market value of $219 per share. Rusty's tax basis in the shares was $
50 per share. Nail had total E&P of $8,485,000 at the time of the distribution. a. What are the amount and character (capital gain or dividend) of any income or gain recognized by Rusty because of
the partial liquidation? Capital gain/ Dividend . . . . . . . ./ per share b. Assuming Nail made no other distributions to Rusty during the year, by what amount does Nail reduce its total E&P because of
the partial liquidation?
Transcribed Image Text:Nail Corporation made a distribution of $589, 110 to Rusty in partial liquidation of the company on December 31 of this year. Rusty, an individual, owns 100 percent of Nail Corporation. The distribution was in exchange for 50 percent of Rusty's stock in the company. At the time of the distribution, the shares had a fair market value of $219 per share. Rusty's tax basis in the shares was $ 50 per share. Nail had total E&P of $8,485,000 at the time of the distribution. a. What are the amount and character (capital gain or dividend) of any income or gain recognized by Rusty because of the partial liquidation? Capital gain/ Dividend . . . . . . . ./ per share b. Assuming Nail made no other distributions to Rusty during the year, by what amount does Nail reduce its total E&P because of the partial liquidation?
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