ding. Annie owns 40 shares with a basis of $100 per share. Betty owns 25 shares with a basis of $100 per share. Charlotte owns 35 shares with a basis of $50 per share. All of the shareholders have held their stock interests for over one year. The fair market value of the common stock is $200 per share. Jackson Corporation has E&P of $5,000. Required: What are the tax consequences to the shareholders under each of the following alternative redemption transactions (ie. amount and character of any realized or recognized gain or loss and basis of any remaining shares)? For each transaction, be sure to discuss the applicability of a, b, and c. a. Jackson redeems 10 shares from Annie for $200 per share. All of
Jackson Corporation is owned by three individuals: Annie, Betty, and Charlotte. There is one class of voting common stock outstanding. Annie owns 40 shares with a basis of $100 per share. Betty owns 25 shares with a basis of $100 per share. Charlotte owns 35 shares with a basis of $50 per share. All of the shareholders have held their stock interests for over one year. The fair market value of the common stock is $200 per share. Jackson Corporation has E&P of $5,000.
Required: What are the tax consequences to the shareholders under each of the
following alternative redemption transactions (ie. amount and character of any realized or recognized gain or loss and basis of any remaining shares)? For each transaction, be sure to discuss the applicability of a, b, and c.
a. Jackson redeems 10 shares from Annie for $200 per share. All of the shareholders are unrelated.
b. Jackson redeems all 25 of Betty’s shares for $80 per share. Betty is Annie’s granddaughter. Charlotte is unrelated to the other shareholders.
c. Jackson redeems 25 shares from Annie for $200 per share. Charlotte is Annie’s mother. Betty is unrelated to the other shareholders. Charlotte and Annie have been estranged due to a bitter feud for over 15 years.
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