Robert owns 60 of 100 shares Ying Corporation’s stock and 80 of 100 shares of Yang Corp. stock. Robert’s basis in his Ying shares is $24,000 and his basis in his Yang shares is $16,000. Robert sells 30 of his Ying shares to Yang Corporation for $80,000. At the end of the year of the sale, Ying and Yang have E&P of $35,000 and $60,000 respectively. a. How will the sale of the stock be treated for tax purposes? sale or dividend? Why? b. What is Robert’s basis in his shares of Ying and Yang after the sale? c. How does the sale effect the E&P of Ying and Yang Corporation? d. How would the result differ if he sold 55 of his Ying shares to Yang Corporation? Why?
Robert owns 60 of 100 shares Ying Corporation’s stock and 80 of 100 shares of Yang Corp. stock. Robert’s basis in his Ying shares is $24,000 and his basis in his Yang shares is $16,000. Robert sells 30 of his Ying shares to Yang Corporation for $80,000. At the end of the year of the sale, Ying and Yang have E&P of $35,000 and $60,000 respectively. a. How will the sale of the stock be treated for tax purposes? sale or dividend? Why? b. What is Robert’s basis in his shares of Ying and Yang after the sale? c. How does the sale effect the E&P of Ying and Yang Corporation? d. How would the result differ if he sold 55 of his Ying shares to Yang Corporation? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Kk.280.
Robert owns 60 of 100 shares Ying Corporation’s stock and 80 of 100 shares of Yang Corp.
stock. Robert’s basis in his Ying shares is $24,000 and his basis in his Yang shares is
$16,000. Robert sells 30 of his Ying shares to Yang Corporation for $80,000. At the end of the
year of the sale, Ying and Yang have E&P of $35,000 and $60,000 respectively.
a. How will the sale of the stock be treated for tax purposes? sale or dividend? Why?
b. What is Robert’s basis in his shares of Ying and Yang after the sale?
c. How does the sale effect the E&P of Ying and Yang Corporation?
d. How would the result differ if he sold 55 of his Ying shares to Yang Corporation? Why?
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