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1- Who Corporation (a C-Corporation) and Rose each own 50% of Tardis Corporations (a C-Corporation) common stock. On January 1, 2017 Tardis has positive accumulative E&P of $120,000. On December 31, 2017 when its current E&P has deficit of $30,000, Tardis makes a cash distribution of $40,000 each to Who and Rose. Whos stock basis in Tardis is $35,000. Roses stock basis in Tardis is $8,000.

How are Who and Rose each taxed on the distribution?

How would Who and Rose each be taxed if instead they received $50,000 distribution each?

2- Amy owns 500 shares of Dalek Corporation with a stock basis of $50,000. Total outstanding shares of Dalek Corporation are 1,000. Of the remaining 500 shares, 50 shares are owned by River (her daughter), and the remaining 450 shares of Dalek Corporation are owned by an unrelated shareholder. Dalek Corporation has E&P of $640,000.

What are the tax consequences to Amy if in a stock redemption; Dalek redeems 100 shares from Amy for $30,000?

What are the tax consequences to Amy if in a stock redemption; Dalek Corporation redeems 400 shares from Amy for $80,000?

What are the tax consequences to Amy if in a complete termination of her 500 shares; Dalek distributes $140,000 to Amy?

If you were advising Amy between the scenarios listed in part a-c above, which scenario would you advise Amy to proceed with? Amy wishes to pay the least amount of tax and has $150,000 of capital loss from other investments.

3- In a liquidating distribution, Harkness Corporation distributes land to its shareholders. Harkness Corporation acquired the land 3 years ago in a 351 transfer. Harkness Corporation distributes land with FMV of $1,800,000, adjusted basis of $400,000 pro-rata to its two individual shareholders Donna and Rory. Donna and Rory do not get along and are not related to each other. Donna (80%) owner has stock basis of $87,000. Rory (20%) owner has stock basis of $20,000.

What is the tax result to Harkness Corporation on the distribution?

What is the tax result (including basis of the property received) to Donna?

What is the tax result (including basis of the property received) to Rory?

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