Wildcat Company is owned equally by Evan Stone and his sister Sara, each of whom holds 1,000 shares in the company. Sara wants to reduce her ownership in the company, and it was decided that the company will redeem 500 of her shares for $25,000 per share on December 31 of this year. Sara's tax basis in each share is $5,000. Wildcat has current E&P of $10,000,000 and at the beginning of the year accumulated E&P is $50,000,000. a. What are the amount and character (capital gain or dividend) recognized by Sara as a result of the stock redemption? Capital gain

after several years of profitable operations, Javell, the sole shareholder of JBD Incorporated, a C corporation, sold 22 percent of her JBD stock to ZNO Incorporated, a C corporation in a similar industry. During the current year, JBD reports $2,900,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZENO's tax rate on the dividend income? 1. ZNO's tax on dividend received? 2. ZNO's tax rate on dividend income?

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Bedrock Incorporated is owned equally by Barney and his wife Betty, each of whom holds 840 shares in the company. Betty wants to reduce her ownership in the company, and it was decided that the company will redeem 420 of her shares for $25, 400 per share on December 31 of this year. Betty's tax basis in each share is $7, 200. Bedrock has current E&P of $ 10, 580,000, and accumulated E&P was $50, 780,000 at the beginning of the year. a. What is the amount and character (capital gain or dividend) recognized by Betty as a result of the stock redemption, assuming only the "substantially disproportionate with respect to the shareholder" test is applied? b. Given your answer to part (a), what is Betty's income tax basis in the remaining 420 shares she owns in the company? c. By what amount does Bedrock reduce its E&P because of the redemption? d. Can Betty argue that the redemption is "not essentially equivalent to a dividend" and should be treated as an 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…

Facts: Ellie and Linda are equal owners in Otter Enterprises, a calendar year business. Ellie has a basis in Otter Enterprises of $80,000 at the beginning of the year. Linda has a basis in Otter Enterprises of $60,000 at the beginning of the year. Assume that Otter Enterprises has no debt. Otter Enterprises has $320.000 of gross income and $210.000 of operating expenses. In addition. Otter has a long-term capital gain of $15.000 and makes distributions to Ellie and Linda of $25,000 each. Required: Discuss the impact of this information on the taxable income of Otter. Ellie, and Linda if Otter is: A. A partnership. B. An S corporation. C. AC corporation. Include in your discussion (1) the amount and character of any income recognized by Ellie, Linda, and Otter (including Otter's taxable income and the amount of any tax paid by Otter) in each business entity form; and (2) Ellie and Linda's basis in Otter Enterprises at the end of the year in each business entity form. Show your work and…

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.

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?

Tracy and Jerome, equal shareholders in Macaw Corporation, receive $600,000 each in distributions on December 31 of the current year. Macaw's current-year taxable income is $1,000,000 and it has no accumulated E & P. Last year, Macaw sold an appreciated asset for $1,200,000 (basis of $400,000). Payment for one-half of the sale of the asset was made this year. How much of Tracy's distribution will be taxed as a dividend? Oa, $300,000- Ob. so Oc. $500,000 Od. $600,000

Danni is a single 30 percent owner of Kolt (a business entity). In the current year, Kolt reported a $1,000,000 business loss. Answer the following questions associated with each of the following alternative scenarios: Note: Leave no answer blank. Enter zero if applicable. b. Kolt is organized as an LLC taxed as a partnership. Thirty percent of Kolt's loss is allocated to Danni. Danni works 20 hours a week on Kolt business activities (she is not considered to be a passive investor in Kolt). Danni has a $400,000 basis in her Kolt ownership interest, and she also has a $400,000 at-risk amount in her investment in Kolt. Danni does not report income or loss from any other business activity investments. How much of the $300,000 loss allocated to her from Kolt is Danni allowed to deduct this year? THE ANSWER IS NOT 250,000 OR 300,000 OR 400,000