orporation is owned 20% by individual A and 80% by corporation B. Grocery Corporation has earnings and profits of $40,000 and makes a current cash distribution of $50,000 to A in exchange for some of her Grocery Corporation stock. A's basis in the stock of Grocery Corporation is $8,000. B's basis in the Grocery stock is $40,000. 1. Determine the tax consequences to A if the distribution does qualify under one of the 3 rules for stock redemptions. 2. Determine the tax consequenc
Grocery Corporation is owned 20% by individual A and 80% by corporation B. Grocery Corporation has earnings and profits of $40,000 and makes a current cash distribution of $50,000 to A in exchange for some of her Grocery Corporation stock. A's basis in the stock of Grocery Corporation is $8,000. B's basis in the Grocery stock is $40,000.
1. Determine the tax consequences to A if the distribution does qualify under one of the 3 rules for stock redemptions.
2. Determine the tax consequences to A if the distribution is in complete liquidation of Grocery Corporation in exchange for all of A's shares.
3. Determine the tax consequences to B if B receives $100,000 in complete liquidation of Grocery Corporation in exchange for all of B's shares.
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