Answered: Debbie owns 100% of the common stock…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Question #30 of 85

Question ID: 1251796

Debbie owns 100% of the common stock (3,750 shares, valued at $2,517,000) of Great West Linens Inc. Her daughters are full-time employees of the business. The business has a 10% average annual growth rate.

Debbie has the following goals for the future:

To further involve her daughters in the business
To maintain control of the business to prevent its sale or liquidation during her lifetime
To freeze the value of the business in her gross estate
To receive sufficient income to maintain her current standard of living both currently and in retirement

Which one of the following is the most appropriate form of business transfer for Debbie?

A preferred stock recapitalization in which Debbie receives a majority of the shares with voting rights, a fixed liquidation value, and qualified income payments, and transfers other shares to her daughters

A private annuity transaction with her daughters transferring all of her shares in Great West Linens in exchange for the annuity payments

An installment sale of her Great West Linens shares with the payments secured by the shares that are sold

A cross-purchase buy-sell agreement with her daughters funded with life insurance

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