Mark and Kelly own 400 and 300 shares, respectively, of Poly Corporation stock, which represent all the shares outstanding. The current market value per share is $27. Polly needs capital to expand its operations, and Kelly is willing to contribute to Poly silver bullion against which the corporation can borrow operating funds. Kelly purchased the bullion 12 years ago, when its cost was a fraction of its current market value. If Kelly wants to avoid recognizing a gain upon transferring the bullion to the corporation, how many additional shares must she

Mark and Kelly own 400 and 300 shares, respectively, of Poly Corporation stock, which represent all the shares outstanding. The current market value per share is $27. Polly needs capital to expand its operations, and Kelly is willing to contribute to Poly silver bullion against which the corporation can borrow operating funds. Kelly purchased the bullion 12 years ago, when its cost was a fraction of its current market value. If Kelly wants to avoid recognizing a gain upon transferring the bullion to the corporation, how many additional shares must she

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter13: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 8DQ

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Missy owns all 100 shares of Sand Corporation stock having a $1.15 million FMV. Her basis in the stock is $450,000. Sand'sE&P balance is $700,000. Peter would like to purchase the stock but wants only the corporation's non-cash assets valued at $850,000. Peter is willing to pay $850,000 for these assets. How would your answer to Part a change (if at all) if Sand first redeems 25 shares of Missy 's stock for $300,000 and then Peter purchases the remaining 75 shares from Missy for $850,000? Missy will recognize of on her sale of 75 sharos of Sand Corporation stock to Peter. She will recognize an additional of Jon the redemption of her remaining shares by Sand.
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Liam, a shareholder in Lager, Inc., (a C corporation), would like to sell 800 of his shares of stock in Lager. Since Lager is not traded on an exchange, the only way to sell is the stock is by having Lager redeem the stock. The fair market value of the 800 shares of stock is $200,000. Liam purchased the stock 10 years ago for $95/share. Lager has E&P of $700,000. The corporate stock in Lager is held as follows: • Liam 2,000 shares • Jennifer (Liam’s sister) 2,000 shares • Katherine (Liam’s mother) 2,000 shares • Beer Partnerships (Liam has a 30% interest) 4,000 shares 10,000 shares if this transaction is treated as a qualified stock redemption, how much tax would Liam owe?
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