Larry owns 90 of the 100 outstanding shares of EDP Corporation. Larry acquired the 90shares in 2009 for $15,000. He also owns70 of the 100 outstanding shares of EDT Corporation. Larry acquired the 70 share sin 2012 for $21,0oo.On October 18,2020, Larry sold 25 shares of EDT stock to EDP Corporation for $43,000.EDT and EDP have current E&P in 2020 of $22,000 and$31,000, respectively. a.How will the sale be treated for federal income tax purposes? b. How much income, and what type, does Larry recognize? c.hat is his basis in his stock? d.What is the effect of the transaction on EDP and EDT?
Larry owns 90 of the 100 outstanding shares of EDP Corporation. Larry acquired the 90shares in 2009 for $15,000. He also owns70 of the 100 outstanding shares of EDT Corporation. Larry acquired the 70 share sin 2012 for $21,0oo.On October 18,2020, Larry sold 25 shares of EDT stock to EDP Corporation for $43,000.EDT and EDP have current E&P in 2020 of $22,000 and$31,000, respectively. a.How will the sale be treated for federal income tax purposes? b. How much income, and what type, does Larry recognize? c.hat is his basis in his stock? d.What is the effect of the transaction on EDP and EDT?
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
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53. Larry owns 90 of the 100 outstanding shares of EDP Corporation. Larry acquired the 90shares in 2009 for $15,000. He also owns70 of the 100 outstanding shares of EDT Corporation. Larry acquired the 70 share sin 2012 for $21,0oo.On October 18,2020, Larry sold 25 shares of EDT stock to EDP Corporation for $43,000.EDT and EDP have current E&P in 2020 of $22,000 and$31,000, respectively.
a.How will the sale be treated for federal income tax purposes?
b. How much income, and what type, does Larry recognize?
c.hat is his basis in his stock?
d.What is the effect of the transaction on EDP and EDT?
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