Flintstone Company is owned equally by Fred Stone and his sister Wilma, each of whom holds 3,200 shares in the company. Wilma wants to reduce her ownership in the company, and it was decided that the company will redeem 730 of her shares for $33,200 per share on December 31 of this year. Wilma’s tax basis in each share is $6,000. Flintstone has current E&P of $10,640,000 and accumulated E&P at the beginning of the year is $50,160,000. a. What are the amount and character (capital gain or dividend) recognized by Wilma as a result of the stock redemption, assuming only the “substantially disproportionate with respect to the shareholder” test is applied? b. What is Wilma’s tax basis in the remaining 2,470 shares she owns in the company? c. Assuming the company did not make any dividend distributions this year, by what amount does Flintstone reduce its E&P as a result of the redemption?

Comet Company is owned equally by Pat and his sister Pam, each of whom holds 100 shares in the company. Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 50 of her shares for $1,000 per share on December 31, 2010. Pam's income tax basis in each share is $500. Comet has a total E&P of $250,000. What are the tax consequences to Pam as a result of the stock redemption? a) $25,000 capital gain and a tax basis in each of her remaining shares of $100. b) $50,000 dividend and a tax basis in each of her remaining shares of $50. c) $50,000 dividend and a tax basis in each of her remaining shares of $100. d) $25,000 capital gain and a tax basis in each of her remaining shares of $500. Kay owns XYZ Corporation stock with a basis of $20,000. She exchanges this for $24,000 of ABC stock and $8,000 of ABC securities as part of a tax-free reorganization. What is Kay's realized gain?

Tall Corporation (an S-corporation) has AAA of $16,000 and AEP of $8,000 .Tall Corp. distributes $20,000 of cash to its Henry, the sole shareholder. Henry's basis in his S Corp stock before the distribution is $40,000. Henry is in the 37% tax bracket. 1. What are the tax consequences to Henry as a result of this distribution? 2. What is ending balance in AAA and AEP. What is Henry's ending stock basis?

viking corporation is owned equally by Sven and his wife Olga, each of whom hold 100 shares in the company. Viking redeemed 60 shares of Sven's stock for $1,700 per share on December 31, 20x3. Viking has total E&P of $430,000. What are the tax consequences to Viking because of the stock redemption? Multiple Choice ___ No reduction in E&P because of the exchange. ___ A reduction of $102,000 in E&P because of the exchange. ___ A reduction of $129,000 in E&P because of the exchange. ___ A reduction of $258,000 in E&P because of the exchange.

Dave and his friend Stewart each owns 50 percent of KBS. During the year, Dave received $96,000 compensation for services he performed for KBS during the year. He performed a significant amount of work for the entity, and he was heavily involved in management decisions for the entity (he was not a passive investor in KBS). After deducting Dave's compensation, KBS reported taxable income of $38,400. How much FICA and/or self-employment tax is Dave required to pay on his compensation and his share of the KBS income if KBS is formed as a C corporation, an S corporation, or a limited liability company (taxed as a partnership) (ignore the 0.9 percent additional Medicare tax)? How much FICA tax would the entity be required to pay on the compensation paid to Dave? Note: Do not round any percentage calculations. Round other intermediate calculations and final answers to the nearest whole dollar amount. C Corporation S Corporation Limited liability company FICA Tax that Dave pays FICA Tax that…

Viking Corporation is owned equally by Sven and his wife Olga, each of whom hold 160 shares in the company. Viking redeemed 80 shares of Sven's stock for $1,900 per share on December 31, 20X3. Viking has total E&P of $580,000. What are the tax consequences to Viking because of the stock redemption? Multiple Choice No reduction in E&P because of the exchange. A reduction of $152,000 in E&P because of the exchange. A reduction of $145,000 in E&P because of the exchange. A reduction of $290,000 in E&P because of the exchange.

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 of cash to Larry on July 1 and $150,000 of cash to Ed on December 30. How will Larry and Ed be taxed.

Ms. Xie, who is in the 37 percent tax bracket, is the sole shareholder and president of Xenon. The corporation's financial records show the following: Gross income from sales of goods: 1,590,000 Operating expenses: (930,000) Salary paid to Ms. Xie: (300,000) Dividend distributions: (200,000) Required: a. Compute the combined tax cost for Xenon and Ms. Xie. (Ignore payroll tax.) b. How would your computation change if Ms. Xie's salary was $500,000 and Xenon paid no dividends?

Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $300,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: FMV Building $112,500 Land 262,500 Total $375,000 Adjusted Tax Basis $30,000 120,000 $150,000 To equalize the exchange, Wiley Corporation paid Hermione $75,000 in addition to her stock. i. Assume Hermione's adjusted tax basis in the land was $375,000. What adjusted tax basis does Wiley Corporation take in the land and building received from Hermione seperately?

Albert owns 100% of A Corporation, Betty is the sole proprietor of B Company, and Cai is the sole proprietor of C Company. Each business generated $500,000 of taxable income and before-tax cash flow. A Corporation and B Company produce a product, but C Company provides accounting services. A Corporation will distribute $200,000 of its after-tax income to Albert. All three owners face a 37% marginal tax rate on ordinary income. B Company qualifies for the § 199A deduction, but C Company does not because it provides accounting services and its taxable income exceeds the threshold for that deduction. Assume the tax rate applied to dividend income equals the top 20% net long-term capital gain rate plus the 3.8% net investment income tax rate. The corporate tax rate is 21% and § 199A deduction is 20%. What will be the values of A Corporation, B Company, and C Company after three years? Assume that each business (a) required a $5,000,000 initial investment, (b) earns an annual 10%…