m, a shareholder in Lager, Inc., (a C corporation), would like to sell 800 of his shares of stock in Lager. Since Lager is not traded on an exchange, the only way to sell is the stock is by having Lager redeem the stock. The fair market value of the 800 shares of stock is $200,000. Liam purchased the stock 10 years ago for $95/share. Lager has E&P of $700,000. The corporate stock in Lager is held as follows: • Liam 2,000 shares • Jennifer (Liam’s sister) 2,000 shares • Katherine (Liam’s mother) 2,000 shares • Beer Partnerships (Liam has a 30% interest) 4,000 shares 10,000 shares if this transaction is treated as a qualified stock redemption, how much tax would Liam owe

SWFT Comprehensive Volume 2019
42nd Edition
ISBN:9780357233306
Author:Maloney
Publisher:Maloney
Chapter19: Corporations: Distributions Not In Complete Liquidation
Section: Chapter Questions
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Liam, a shareholder in Lager, Inc., (a C corporation), would like to sell 800 of his shares of stock in Lager. Since Lager is not traded on an exchange, the only way to sell is the stock is by having Lager redeem the stock. The fair market value of the 800 shares of stock is $200,000. Liam purchased the stock 10 years ago for $95/share. Lager has E&P of $700,000. The corporate stock in Lager is held as follows: • Liam 2,000 shares • Jennifer (Liam’s sister) 2,000 shares • Katherine (Liam’s mother) 2,000 shares • Beer Partnerships (Liam has a 30% interest) 4,000 shares 10,000 shares if this transaction is treated as a qualified stock redemption, how much tax would Liam owe?
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