In each of the following independent situations, determine if the redemption of shares will be treated as an exchange or as a distribution. For situations 1 – 2, the ownership of a corporation is:   Andy                         40 shares Barb                         20 shares Cindy                       40 shares   Situation 1: The corporation redeems 10 shares of stock held by Barb.   Situation 2: The corporation redeems 30 shares of stock held by Cindy.   Situation 3: The corporation redeems 15 shares of stock held by Andy.   Situation 4: Same facts as Situation 1 except Andy is Barb’s father.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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In each of the following independent situations, determine if the redemption of shares will be treated as an exchange or as a distribution.

For situations 1 – 2, the ownership of a corporation is:

 

Andy                         40 shares

Barb                         20 shares

Cindy                       40 shares

 

Situation 1: The corporation redeems 10 shares of stock held by Barb.

 

Situation 2: The corporation redeems 30 shares of stock held by Cindy.

 

Situation 3: The corporation redeems 15 shares of stock held by Andy.

 

Situation 4: Same facts as Situation 1 except Andy is Barb’s father. 

 

To answer this be sure to first review the “Attribution Rules” 

 

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