Bonnie and Clyde are the only two shareholders in GetawayCorporation. Bonnie owns 55 shares with a basis of $4,400, andClyde owns the remaining 45 shares with a basis of $16,500. Atyear-end, Getaway is considering different alternatives forredeeming some shares of stock. Evaluate whether each of thefollowing stock redemption transactions will qualify for sale andexchange treatment. (Leave no answer blank. Enter zero ifapplicable.)
Required:
- Getaway redeems 5 of Bonnie’s shares for $2,000. Getaway has$29,000 of E&P at year-end and Bonnie is unrelated toClyde.
- Getaway redeems 28 of Bonnie’s shares for $5,000. Getaway has$29,000 of E&P at year-end and Bonnie is unrelated toClyde.
- Getaway redeems 7 of Clyde’s shares for $2,500. Getaway has$29,000 of E&P at year-end and Clyde is unrelated toBonnie.
| before the redemption and | | % | after the redemption. | | Does this qualify as a saleor exchange? | | If so, how much is thegain? | |
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