Indigo Corporation has $15,000 AEP and CEP of $30,000. Renee, the sole shareholder of Indigo Corporation, sold all her stock of Indigo to Chad on July 1 for $180,000. Renee's stock basis at the beginning of the year was $125,000. Indigo made a $60,000 cash distribution to Renee immediately before the sale and Chad received a $140,000 cash distribution from Indigo on November 1. Which of the following statements is correct? Select one: a. Renee recognizes a $91,000 gain on the sale of the stock. b. Renee recognizes a $84,000 gain on the sale of the stock. c. Chad recognizes dividend income of $21,000 and his stock basis is $61,000 d. Both a and c. are correct. e. None of these.
Indigo Corporation has $15,000 AEP and CEP of $30,000. Renee, the sole shareholder of Indigo Corporation, sold all her stock of Indigo to Chad on July 1 for $180,000. Renee's stock basis at the beginning of the year was $125,000. Indigo made a $60,000 cash distribution to Renee immediately before the sale and Chad received a $140,000 cash distribution from Indigo on November 1. Which of the following statements is correct? Select one: a. Renee recognizes a $91,000 gain on the sale of the stock. b. Renee recognizes a $84,000 gain on the sale of the stock. c. Chad recognizes dividend income of $21,000 and his stock basis is $61,000 d. Both a and c. are correct. e. None of these.
Chapter22: S Corporations
Section: Chapter Questions
Problem 27P
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Question
Indigo Corporation has $15,000 AEP and CEP of $30,000. Renee, the sole shareholder of Indigo Corporation, sold all her stock of Indigo to Chad on July 1 for $180,000. Renee's stock basis at the beginning of the year was $125,000. Indigo made a $60,000 cash distribution to Renee immediately before the sale and Chad received a $140,000 cash distribution from Indigo on November 1. Which of the following statements is correct?
Select one:
a.
Renee recognizes a $91,000 gain on the sale of the stock.
b.
Renee recognizes a $84,000 gain on the sale of the stock.
c.
Chad recognizes dividend income of $21,000 and his stock basis is $61,000
d.
Both a and c. are correct.
e.
None of these.
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