Debbie, the sole shareholder of Ancient Corporation’s only class of stock, owns 1,000 shares, which she purchased 15 years ago. Debbie’s basis in the stock is $1 million. During the current year, Ancient, which had earnings and profits of $2.5 million, redeemed 900 shares for $2,250,000. What are the amount and the character of Debbie’s gain? A. $2,250,000 dividend. B. $2,250,000 capital gain. C. $1,350,000 dividend. D. $1,350,000 capital gain.
Debbie, the sole shareholder of Ancient Corporation’s only class of stock, owns 1,000 shares, which she purchased 15 years ago. Debbie’s basis in the stock is $1 million. During the current year, Ancient, which had earnings and profits of $2.5 million, redeemed 900 shares for $2,250,000. What are the amount and the character of Debbie’s gain? A. $2,250,000 dividend. B. $2,250,000 capital gain. C. $1,350,000 dividend. D. $1,350,000 capital gain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Debbie, the sole shareholder of Ancient Corporation’s only class of stock, owns 1,000 shares, which she purchased 15 years ago. Debbie’s basis in the stock is $1 million. During the current year, Ancient, which had earnings and profits of $2.5 million, redeemed 900 shares for $2,250,000. What are the amount and the character of Debbie’s gain? A. $2,250,000 dividend. B. $2,250,000
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