HomeworkLib
Question

Problem 19-55 (LO. 8, 9) Robert and Lori (Robert's sister) own all of the stock in...

Problem 19-55 (LO. 8, 9)

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?

a. Swan Corporation distributes cash of $600,000 to Lori, and she uses the cash to purchase Robert's shares.

Lori would have dividend income  of $ 600,000 (correct) and a basis of $ 600,000 (correct) in the newly acquired 500 shares and become the sole shareholder of Swan. Robert would have a capital gain of $ 515,000 (correct) on the sale. As a result of the stock transaction, Swan recognizes no gain or loss  and reduces  its E & P by $______??

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

solution & Within this case, if Swan corporation redeems all of roberts shares for Gooooo, then Robert would again have to b

0 1
Add a comment
Know the answer?
Add Answer to:
Problem 19-55 (LO. 8, 9) Robert and Lori (Robert's sister) own all of the stock in...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Beola and Leona, individuals, own all of the outstanding stock of Carl Corporation. Each has a...

    Beola and Leona, individuals, own all of the outstanding stock of Carl Corporation. Each has a basis of $20,000 in their twenty (20) shares of stock. Carl Corporation has Accumulated Earnings And Profits (E&P) of $1,000,000. Beola wishes to retire in the current year and wants to sell her stock for its Fair Market Value of $600,000. Leona would like to purchase Beola's shares and, thus, become the sole shareholder of Carl Corporation but does not have any available Cash....

  • Problem 22-39 (LO. 8, 9) At the beginning of the tax year, Lizzie holds a $10,000...

    Problem 22-39 (LO. 8, 9) At the beginning of the tax year, Lizzie holds a $10,000 stock basis as the sole shareholder of Spike, Inc., an S corporation. During the year, Spike reports the following: Net taxable income from sales $25,000 Net short-term capital loss (18,000) Cash distribution to Lizzie, 12/31 40,000 If an amount is zero, enter "0". 57,000 X. a. Determine Lizzie's stock basis at the end of the year. $ b. Of Lizzie's $40,000 cash distribution, $...

  • Renee, the sole shareholder of Indigo Corporation, sold her stock to Chad on July 1 for...

    Renee, the sole shareholder of Indigo Corporation, sold her stock to Chad on July 1 for $180,000. Renee's stock basis at the beginning of the year was $120,000. Indigo made a $60,000 cash distribution to Renee immediately before the sale, whereas Chad received a $120,000 cash distribution from Indigo on November 1. As of the beginning of the current year, Indigo had $26,000 in accumulated E & P, whereas current E & P (before distributions) was $90,000. Which statement is...

  • Problem 5-35 (LO. 1, 3) Larry, the sole shareholder of Brown Corporation, sold his Brown stock...

    Problem 5-35 (LO. 1, 3) Larry, the sole shareholder of Brown Corporation, sold his Brown stock to Ed on July 30 for $270,000. Larry's basis in the stock was $200,000 at the beginning of the year. Brown had accumulated E & P of $120,000 on January 1 and has current E & P of $240,000. During the year, Brown made the following distributions: $450,000 cash to Larry on July 1 and $150,000 cash to Ed on December 30. If an...

  • Problem 19-57 (LO. 8, 9) Broadbill Corporation (E & P of $650,000) has 1,000 shares of...

    Problem 19-57 (LO. 8, 9) Broadbill Corporation (E & P of $650,000) has 1,000 shares of common stock outstanding. The shares are owned by the following individuals: Tammy, 300 shares; Yvette, 400 shares; and Jeremy, 300 shares. Each of the shareholders paid $50 per share for the Broadbill stock four years ago. In the current year, Broadbill Corporation distributes $75,000 to Tammy in redemption of 150 of her shares. Determine the tax consequences of the redemption to Tammy and to...

  • Problem 20-23 (LO. 1,4) Dove Corporation (E & P of $800,000) has 1,000 shares of stock...

    Problem 20-23 (LO. 1,4) Dove Corporation (E & P of $800,000) has 1,000 shares of stock outstanding. The shares are owned as follows: Julia, 600 shares; Maxine (Julia's sister), 300 shares; and Janine (Julia's daughter), 100 shares. Dove Corporation owns land (basis of $300,000, fair market value of $260,000) that it purchased as an investment seven years ago. Dove distributes the land to Julia in exchange for all of her shares in the corporation. Julia had a basis of $275,000...

  • Question 1 Which of the following is an incorrect statement regarding the tax consequences of a...

    Question 1 Which of the following is an incorrect statement regarding the tax consequences of a § 306 stock disposition? In a sale of § 306 stock, the shareholder generally recognizes ordinary income equal to the fair market value of the preferred stock on the date it was acquired in the stock dividend. No loss is recognized on a sale of § 306 stock. The issuing corporation’s E & P is not reduced by a sale of § 306 stock....

  • Manistee Corporation reported taxable income of $1,200,000 this year and paid federal income taxes of $408,000....

    Manistee Corporation reported taxable income of $1,200,000 this year and paid federal income taxes of $408,000. Not included in the computation was disallowed entertainment expenses of $25,000, tax-exempt interest of $20,000, and a net capital loss of $50,000 incurred this year. Manistee is an accrual basis taxpayer. The corporation’s current earnings and profits this year would be: Multiple Choice $1,200,000 $1,145,000 $787,000 $737,000 Boulder Company reports current E&P of $500,000 this year and accumulated negative E&P at the beginning of...

  • Problem 12-16 (LO. 2, 4) Seth, Pete, Cara, and Jen form Kingfisher Corporation with the following...

    Problem 12-16 (LO. 2, 4) Seth, Pete, Cara, and Jen form Kingfisher Corporation with the following consideration: Consideration Transferred Basis to Transferor Fair Market Value Number of Shares Issued From Seth- Inventory $30,000 $96,000 30* From Pete- Equipment ($30,000 of depreciation taken by Pete in prior years) 45,000 99,000 From Cara- Proprietary process 15,000 90,000 From Jen- Cash 30,000 30,000 *Seth receives $6,000 in cash in addition to the 30 shares. **Pete receives $9,000 in cash in addition to the...

  • I do not know if the answers entered are correct. Problem 21-33 (LO. 3, 17) During...

    I do not know if the answers entered are correct. Problem 21-33 (LO. 3, 17) During the current tax year, Dave and Stu formed the DS LLC with Dave contributing land with a basis of $360,000 and a fair market value of $600,000 at the contribution date. At the end of the year, the LLC distributes $300,000 of cash to Dave. The LLC made no distributions to Stu. Assume there were no other income or loss transactions for the year...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT