Problem 6-52 (LO. 3) Ramon and Sophie are the sole shareholders of Gull Corporation. Ramon and Sophie each have a basis of $100,000 in their 2,000 shares of Gull common stock. When its E & P was $700,000, Gull Corporation issued a preferred stock dividend on the common shares of Ramon and Sophie, giving each 1,000 shares of preferred stock with a par value of $100 per share. At the time of the stock dividend, fair market value of one share of common stock was $150 and fair market value of one share of preferred stock was $75. If an amount is zero, enter "0". a. What are the tax consequences of the distribution to Ramon and Sophie? Ramon and Sophie have neither gain nor loss ✓ in the amount of $ What is the basis for the common stock and preferred stock for each shareholder? Common stock: $ 100,000 X Preferred stock: $ 75,000 X Feedback Check My Work Stock redemptions that do not fall under any of the qualifying stock redemption provisions are treated as dividend distribu extent of the corporation's E & P. Resourceful taxpayers, however, devised ways to circumvent the redemption provisions. these transactions involved structuring what was, in effect, a stock redemption or a dividend distribution as a sale of the s 0 b. What are the tax consequences to Ramon if he later sells his preferred stock to Anthony for $75,000? Anthony is not related to Ramon. A sale of the preferred stock to Anthony will produce $ 75,000 ✓ of ordinary ✓ income.
Problem 6-52 (LO. 3) Ramon and Sophie are the sole shareholders of Gull Corporation. Ramon and Sophie each have a basis of $100,000 in their 2,000 shares of Gull common stock. When its E & P was $700,000, Gull Corporation issued a preferred stock dividend on the common shares of Ramon and Sophie, giving each 1,000 shares of preferred stock with a par value of $100 per share. At the time of the stock dividend, fair market value of one share of common stock was $150 and fair market value of one share of preferred stock was $75. If an amount is zero, enter "0". a. What are the tax consequences of the distribution to Ramon and Sophie? Ramon and Sophie have neither gain nor loss ✓ in the amount of $ What is the basis for the common stock and preferred stock for each shareholder? Common stock: $ 100,000 X Preferred stock: $ 75,000 X Feedback Check My Work Stock redemptions that do not fall under any of the qualifying stock redemption provisions are treated as dividend distribu extent of the corporation's E & P. Resourceful taxpayers, however, devised ways to circumvent the redemption provisions. these transactions involved structuring what was, in effect, a stock redemption or a dividend distribution as a sale of the s 0 b. What are the tax consequences to Ramon if he later sells his preferred stock to Anthony for $75,000? Anthony is not related to Ramon. A sale of the preferred stock to Anthony will produce $ 75,000 ✓ of ordinary ✓ income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 6-52 (LO. 3)
Ramon and Sophie are the sole shareholders of Gull Corporation. Ramon and Sophie each have a basis of $100,000 in their
2,000 shares of Gull common stock. When its E & P was $700,000, Gull Corporation issued a preferred stock dividend on the
common shares of Ramon and Sophie, giving each 1,000 shares of preferred stock with a par value of $100 per share. At the
time of the stock dividend, fair market value of one share of common stock was $150 and fair market value of one share of
preferred stock was $75.
If an amount is zero, enter "0".
a. What are the tax consequences of the distribution to Ramon and Sophie?
Ramon and Sophie have neither gain nor loss ✓ in the amount of $
What is the basis for the common stock and preferred stock for each shareholder?
Common stock: $
100,000 X
Preferred stock: $
75,000 X
Feedback
Check My Work
Stock redemptions that do not fall under any of the qualifying stock redemption provisions are treated as dividend distribu
extent of the corporation's E & P. Resourceful taxpayers, however, devised ways to circumvent the redemption provisions.
these transactions involved structuring what was, in effect, a stock redemption or a dividend distribution as a sale of the s
0
b. What are the tax consequences to Ramon if he later sells his preferred stock to Anthony for $75,000? Anthony is not
related to Ramon.
A sale of the preferred stock to Anthony will produce $
75,000
✓ of ordinary ✓
income.
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