A corporation is owned 70% by Jones and 30% by Smith. Jones owns 70 shares with a cost of $100 each. Smith owns 30 shares with a cost of $100 per share. The company redeems 20 shares from Jones at a redemption price of $400 per share. No stock is redeemed from Smith. This is not a redemption to pay death taxes, and it is not a partial liquidation. What is the tax impact on Jones?
A. dividend income of $6,000
B. capital gain of $8,000
C. dividend income of $8,000
D. capital gain of $6,000
Answer: C
You might also like to view...
Which of the following statements about an organization's mission statement is true?
a. The mission statement should express an organization's purpose. b. The mission statement should identify how an organization will meet the needs of its targeted customers. c. The mission statement must be communicated throughout the organization. d. All of the statements are true.
A treaty concerned with rights over territory, such as boundaries and servitudes is called the ________
A. executive agreement B. constitutional treaty C. self-executing treaty D. dispositive treaty
The present value of an ordinary annuity of $2,350 each year for 8 years, assuming an opportunity cost of 11 percent, is: (Round to the nearest whole dollar.)
A) $1,020 B) $27,869 C) $18,800 D) $12,093
According to the residual theory of dividends, if a firm's equity need exceeds the amount of retained earnings, the firm would ________
A) borrow to pay the cash dividend B) sell additional stock to pay the cash dividend C) pay no cash dividends D) pay less dividends