Robert and Lori (Robert’s sister) own all of the stock in Swan Corporation (E & P of $1,000,000). Each owns 500 shares and has a basis of $85,000 in the shares. Robert wants to sell his stock for $600,000, the fair market value, but he will continue to be employed as an officer of Swan Corporation after the sale. Lori would like to purchase Robert’s shares, becoming the sole shareholder in Swan, but Lori is short of funds. What are the tax consequences to Robert, Lori, and Swan Corporation under the following circumstances? Swan Corporation distributes cash of $600,000 to Lori, and she uses the cash to purchase Robert’s shares. Swan Corporation redeems all of Robert’s shares for $600,000.
Robert and Lori (Robert’s sister) own all of the stock in Swan Corporation (E & P of $1,000,000). Each owns 500 shares and has a basis of $85,000 in the shares. Robert wants to sell his stock for $600,000, the fair market value, but he will continue to be employed as an officer of Swan Corporation after the sale. Lori would like to purchase Robert’s shares, becoming the sole shareholder in Swan, but Lori is short of funds. What are the tax consequences to Robert, Lori, and Swan Corporation under the following circumstances?
- Swan Corporation distributes cash of $600,000 to Lori, and she uses the cash to purchase Robert’s shares.
- Swan Corporation redeems all of Robert’s shares for $600,000.
Individuals who put resources into fixed-pay securities get customary interest installments at a fixed worth. These instruments can be recovered previously or on the date of maturity. Whenever reclaimed at the hour of development, a financial backer gets the standard worth or the presumptive worth of the security.
Companies that issue bonds or different securities may pay financial backers recovery esteem when they repurchase their securities at the latest date of maturity. Interest installments for the most part stop before they do this. The reclamation esteem is regularly higher than a bond's standard worth. In this way, the recovery of these bonds alluded to as called bonds, is at a top notch cost better than average.
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