Bristlebird Corporation (E&P of $700,000) has 3,000 shares of common stock outstanding. Juan owns 1,500 shares and his wife, Roberta, owns 1,500 shares. Juan and Roberta each have a basis of $90,000 in their Bristlebird stock. In the current year, Bristlebird Corp. redeems 1,000 shares from Juan for $250,000. With respect to the distribution in redemption of the Bristlebird stock: a. Juan has a dividend income of $250,000. b. Juan has a dividend income of $190,000. c. Juan has a capital gain of $250,000. d. Juan has a capital gain of $190,000. e. None of the above.
Bristlebird Corporation (E&P of $700,000) has 3,000 shares of common stock outstanding. Juan owns 1,500 shares and his wife, Roberta, owns 1,500 shares. Juan and Roberta each have a basis of $90,000 in their Bristlebird stock. In the current year, Bristlebird Corp. redeems 1,000 shares from Juan for $250,000. With respect to the distribution in redemption of the Bristlebird stock: a. Juan has a dividend income of $250,000. b. Juan has a dividend income of $190,000. c. Juan has a capital gain of $250,000. d. Juan has a capital gain of $190,000. e. None of the above.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Bristlebird Corporation (E&P of $700,000) has 3,000 shares of common stock
outstanding. Juan owns 1,500 shares and his wife, Roberta, owns 1,500
shares. Juan and Roberta each have a basis of $90,000 in their Bristlebird
stock. In the current year, Bristlebird Corp. redeems 1,000 shares from Juan
for $250,000. With respect to the distribution in redemption of the Bristlebird
stock:
a. Juan has a dividend income of $250,000.
b. Juan has a dividend income of $190,000.
c. Juan has a capital gain of $250,000.
d. Juan has a capital gain of $190,000.
e. None of the above.
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