WLS Corporation has three shareholders: Brown (20%), Smith (10%), and Jones (70%). None of these individuals are related. The corporation redeems all of Brown's shares for $100,000. Brown's basis in his shares is $40,000. SELECT ALL OF THE TRUE STATEMENTS FROM THE LIST BELOW!! Brown has $100,000 of dividend income. Brown has a capital gain of $60,000. WLS Corporation will transfer out 20% of the E&P on the distribution. WLS Corporation will transfer out $100,000 of E&P on the distribution.

WLS Corporation has three shareholders: Brown (20%), Smith (10%), and Jones (70%). None of these individuals are related. The corporation redeems all of Brown's shares for $100,000. Brown's basis in his shares is $40,000. SELECT ALL OF THE TRUE STATEMENTS FROM THE LIST BELOW!! Brown has $100,000 of dividend income. Brown has a capital gain of $60,000. WLS Corporation will transfer out 20% of the E&P on the distribution. WLS Corporation will transfer out $100,000 of E&P on the distribution.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Jay owns 100% of Kaye Company. Jay (an individual) is in the 37% tax bracket. Assume that Kaye Company is a corporation and distributes $50,000 cash to Jay as a dividend. How much tax must Jay pay on this $50,000 dividend?
Melanie is the sole stockholder of Machine Inc., an S corporation. Her basis in the stock as of the end of year 4 is $43,400. During year 5, Machine reported a loss of $19,000. During year 5, Melanie received a distribution of $38,000 from Machine and loaned $11,000 directly to Machine. What is Melanie’s total of stock and debt basis in Machine stock as of the end of year 5? a.$0 b.$24,400 c.$35,400 d.$54,400
C and D organized Z Corporation 10 years ago, each contributing $40,000 and each receiving 400 shares of common stock. Five years ago, in June, Z declared a one for one dividend payable in pure preferred with a $400 fair market value. The value of the common stock after the distribution was $1,600 per share. In that year, five years ago, Z had accumulated E&P of $52,000 and current E&P of $12,000. In the current year, Z has accumulated E&P of $112,000 and current E&P of $8,000. In December of the current year, C sells all of his preferred stock to E for $36,000. In June of that same year, C had previously sold all of his common stock to F for $200,000. E is C’s son. Same facts as Question 7, except in the current year Z redeems all of C’s preferred stock in exchange for $36,000. a. 306 does not apply to this transaction. The entire $36,000 is ordinary income. b. 306 does not apply to this transaction. Of the redemption proceeds, $32,000 is ordinary income.…
2. T corporation (e & p $800,000) has 1,000 shares of stock outstanding. The shares are owned as followed: james 600 shares; stephanie (james sister) 300 shares; luke (james son) 100 shares. T corporation owns land (basis of $300,000, fmv of $260,000) that it purchased as an investment 10 years ago. James had a basis of $275,000 in his shares. What are the tax consequences for both t cororation and james if the distribution is: a qualified stock redemption? b. liquidating distribution?
X Corp, a personal holding company, is owned by two individuals and has gross income as follows: $30,000 gross profits from sales, tax-exempt interest of $3,000, dividends of $5,000 from a 10% owned corporation, and taxable interest of $40,000. What is the amount of X Corp's personal holding company income?
At the beginning of the current year, Tymoe, an S corporation, was owned by two individual shareholders, Tyler and Moe. Tyler owns 52% and Moe owns 48%. During the year, Tymoe had ordinary income of $480,000, a net long-term capital gain of $45,000, and charitable contributions of $12,000. What is the amount of ordinary income, capital gain, and charitable contribution from Tymoe's activities that Tyler and Moe must each report in the current year?
Shetland Corporation, a C corporation, has E&P of $1,000,000. The corporation stock is held as follows: Matthew 1,000 shares Aaron 1,000 shares Fay 1,000 shares Marlyebone Partnership 1,000 shares Devon Corp. 1,000 shares Total Shares 5,000 shares Matthew would like to redeem 500 shares of stock. The fair market value of the stock is $200,000. Matthew acquired the stock 10 years ago and has a basis of $200/share in her stock. Note: Since Shetland Corporation is not traded on an exchange, Matthew does not have the option for selling his stock on an open market. Here is additional information about Shetland Corporation: · Aaron is Matthew’s first cousin · Fay is Matthew’s mother · Matthew owns 10% of Marlyebone Partnership · Matthew owns 20% of the shares in Devon Corporation a. Will this redemption of 500 shares of Matthew’s stock be treated as a qualified stock redemption or will it be treated as a distribution? Support your answer with calculations. b. How much tax must…
Please help me
Carlota and Dave formed an S corporation; Carlota owns 75% of the out-standing shares, and Dave owns the rest. When the entity's AAA balance is $1,000,000, it distributes an asset to each shareholder; the basis of each asset to the corporation is $197 500 Carlota's asset is worth $276,500, and Dave's is worth $237,000. a. How much gain, if any, does the the corporation recognize as a result of the distribution? $ 54250 b. By how much, if any, does the distribution increase Dave's gross income? $ t
During the year, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. At the end of last year, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct? a. Nutt recognizes a $1,000 LTCG. b. Nutt's stock basis is $2,000. c. Nutt's ordinary income is $15,000. d. Nutt's tax-free return of capital is $11,000.'
Linda Clark received $225,000 from her mother's estate. She placed the funds into the hands of a broker, who purchased the following securities on Linda's behalf: a. Common stock was purchased at a cost of $96,000. The stock paid no dividends, but it was sold for $165,000 at the end of three years. b. Preferred stock was purchased at its par value of $51,000. The stock paid a 4% dividend (based on par value) each year for three years. At the end of three years, the stock was sold for $37,000. c. Bonds were purchased at a cost of $78,000. The bonds paid annual interest of $4,500. After three years, the bonds were sold for $83,000. The securities were all sold at the end of three years so that Linda would have funds available to open a new business venture. The broker stated that the investments had earned more than a 11% return, and he gave Linda the following computations to support his statement: Common stock: Gain on sale ($165,000 - $96,000) $ 69,000 Preferred stock: Dividends paid…
6. Brian owns 25% of Raisman Corporation's single class of stock (Brian owns 500 of 2,000 outstanding shares). Brian's basis in the stock is $12,000. Raisman's E&P is $132,000. If Raisman redeems 200 of Brian's stock for $28,000, Brian must report dividend income (if any) of (show all work and explain your answer): A) $0. B) $11,200. C) $16,800. D) $28,000.