Sharon Slotten purchased shares in ATCO Ltd. during the current year as follows:Jan. 1: 200 shares for $25 per shareApril 2: 300 shares for $30 per shareJuly 1: 100 shares sold for $45 per shareSept. 8: 500 shares for $24 per shareOn December 22, of the current year Sharon sells 200 ATCO Ltd. shares for $35 per share andpays $100 in sales commission.Required: Calculate the taxable capital gain or loss included in Sharon's NET INCOME underparagraph 3(b) of the Income Tax Act.Solution:DateNo. of sharesCost per share Cost in PoolJan.1200$25.00 $5,000Apr.2300$30.00 $9,000Subtotal01-Jul100$45.00 $4,500Sept.8TotalCalculation of Capital Gain:Proceeds of dispositionSelling costsAdjusted cost baseCapital Gain (loss)Capital Gains reserveCapital GainInclusion rateTaxable capital gainTotal01-JulDec.22$200$

Sharon's Taxable Capital Gain CalculationStep 1: Identify Shares Sold on December 22ndWe need to…

Answered: Sharon Slotten purchased shares in ATCO…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Hawkeye Company reports current E&P of $300,000 this year and accumulated E&P at the beginning of the year of $200,000. Hawkeye distributed $400,000 to its sole shareholder, Ray Kinsella, on December 31 of this year. Ray's tax basis in his Hawkeye stock before the distribution is $75,000. b. What is Ray's tax basis in his Hawkeye stock after the distribution? Tax basis
Ian holds 100 shares in Big Bank Pty Ltd. The company paid a partially franked dividend of $4 per share (franked to 30%) on 1 June. Assume a corporate tax rate of 30%. How much tax (if any) must Ian pay on the dividend income? Assume his applicable marginal tax rate is 45% and this is the only transaction. a. $160 b. Nil c. $151 d. $57
Eight years ago, SW purchased 1,750 shares of Delta stock. On May 20 of the current year, it sold these shares for $50 per share. Required: In each of the following cases, compute SW's recognized gain or loss on this sale: a. SW's cost basis in the 1,750 shares was $62 per share. It did not purchase any other Delta shares during this year. b. SW's cost basis in the 1,750 shares was $62 per share. It purchased 1,950 shares of Delta on May 1 for $52 per share. c. SW's cost basis in the 1,750 shares was $62 per share. It purchased 1,950 shares of Delta on June 8 for $52 per share. d. SW's cost basis in the 1,750 shares was $41 per share. It purchased 1,950 shares of Delta on June 8 for $52 per share. a. b. C. d. Amount
Brett and Illain formed a new Corporation by transferring the following assets in exchange for stock:▪ Brett transferred: Property subject to a 70,000 mortgage; FMV $1,000000, Basis 500,000. In exchange, she received 200 shares of Stock and relief of the mortgage liability. ▪ Illain transferred: Inventory with a Basis of 15,000 and FMV 150,000. Required:a. What is Brett’s basis in the stock she received b. What is Brett’s recognized gain/loss
Gene Grams is a 40% owner of a calendar year S corporation during the tax year. His beginning stock basis is $150,000, and the S corporation reports the following items. Ordinary income $72,000 Short-term capital gain 16,000 § 1231 loss 6,000 Tax-exempt interest income 5,000 Distributions 40,000 Gene sells all of his stock in the S corporation for $310,000. What is the amount and character of the gain or loss to Gene?
21 )
Show your work On January 1 of the current year, Rhondell Corporation has accumulated E & P of $174,000. Current E & P for the year is $522,000, earned evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $278,400 ($139,200 to Elizabeth and $139,200 to Jonathan) on April 30 and a total of $487,200 ($243,600 to Jonathan and $243,600 Marshall) on December 31. Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in their stock for any amount that is treated as return of capital.
Chi has the following transactions in Smoke Corp. and Mirrors Corp. shares: Smoke Mirror May 1, 2018 Purchase @ $25.00 100 @ $22.50 100 December 20, 2018 Sale 100 @ $28.00 100 @ $24.00 January 3, 2019 Purchase N/A 100 @ $23.20 June 1, 2019 Sale N/A 100 @ $26.00 Chi's taxable capital gains for 2018 and 2019 are: $275 for 2018, $140 for 2019 $225 for 2018, $90 for 2019 $275 for 2018, $90 for 2019 $225 for 2018, $140 for 2019
Magenta Corporation has 1,000 shares of stock outstanding. Julie owns 400 of these shares, and unrelated individuals own the remaining 600 shares. Magenta redeems 100 of Julie's shares for $200,000. In the year of the redemption, Magenta has $230,000 of paid-in capital and $330,000 of E&P. Requirements a. How does the redemption affect Magenta's E&P balance if the redemption qualifies for sale treatment? b. How does the redemption affect Magenta's E&P balance if the redemption does not qualify for sale treatment? Requirements a and b. How does the redemption affect Magenta's E&P balance if the redemption qualifies for sale treatment and if the redemption does not qualify for sale treatement? (If an input field is not used, leave the input field empty. Do not select a label or enter a zero.) Remaining Redemption qualifies for sale treatment Redemption does not qualify for sale treatment Effect on E&P By this amount amount (if Treatment of remaining applicable) amount
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K sold 3,000 shares of a public company for $12,000. Before the sale, K owned 10,000 shares; an initial 4,000 were purchased for $4,000 and an additional 6,000 were purchased for $18,000 twenty days before the sale. What amount is to be reported in net income for tax purposes?
Joel is a shareholder in an S corporation. He purchased 200 shares of the corporation at the beginning of the year for $25,000. His Schedule K-1 (Form 1120-S) for the same year reported ordinary business income of $1,300 in Part Ill, box 1 and $1,500 of net long-term capital gain in Part III, box 8a. What is Joel's year-end adjusted basis in the corporation? $25,000 $26,300 $26,500 $27,800 h

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