Sarah owns 100% of Apex Corporation (Earnings & Profits of $600,000) and 100% of Delta Corporation (Earnings & Profits of $450,000). Sarah sells 150 shares in Apex (basis of $75,000) to Delta for $125,000, which is its fair market value. Sarah purchased the Apex stock five years ago. Determine the tax treatment of this transaction: A. A long-term capital gain of $50,000 B. A long-term capital gain of $125,000 C. Dividend income of $50,000 D. Dividend income of $125,000 E. None of the above
Sarah owns 100% of Apex Corporation (Earnings & Profits of $600,000) and 100% of Delta Corporation (Earnings & Profits of $450,000). Sarah sells 150 shares in Apex (basis of $75,000) to Delta for $125,000, which is its fair market value. Sarah purchased the Apex stock five years ago. Determine the tax treatment of this transaction: A. A long-term capital gain of $50,000 B. A long-term capital gain of $125,000 C. Dividend income of $50,000 D. Dividend income of $125,000 E. None of the above
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter13: Corporations: Earning & Profits And Distributions
Section: Chapter Questions
Problem 22P
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General Accounting
Transcribed Image Text:Sarah owns 100% of Apex Corporation (Earnings & Profits of $600,000)
and 100% of Delta Corporation (Earnings & Profits of $450,000). Sarah
sells 150 shares in Apex (basis of $75,000) to Delta for $125,000, which
is its fair market value. Sarah purchased the Apex stock five years ago.
Determine the tax treatment of this transaction:
A. A long-term capital gain of $50,000
B. A long-term capital gain of $125,000
C. Dividend income of $50,000
D. Dividend income of $125,000
E. None of the above
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