tax27

tax27

Henry, Emmy, and Frannie, unrelated individuals, own all of the stock in New Corporation with earnings and profits of $1,200,000 as follows: Henry own 1,300
shares; Emmy owns 400 shares; and Frannie owns 300 shares. New Corporation redeems 300 of Henry’s shares with a basis of $60,000 for $450,000. With respect to the
distribution in redemption of the stock:
Answer

A. Henry has a capital gain of $390,000.

B. Henry has dividend income of $450,000.

C. Henry has dividend income of $390,000.

D. Henry has a capital gain of $450,000.

E. None of the above.

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