Question

In: Accounting

Julio is in the 33% tax bracket. He acquired 2,000 shares of stock in Gray Corporation...

Julio is in the 33% tax bracket. He acquired 2,000 shares of stock in Gray Corporation seven years ago costing $50 per share. In the current year, Julio received a payment of $150,000 from Gray Corporation in exchange for 1,000 of his shares in Gray. Gray has E & P of $1 million. What tax liability would Julio incur on the payment in each of the following situations? Assume that Julio has no capital losses.

a. The stock redemption qualifies for sale or exchange treatment.

b. The stock redemption does not qualify for sale or exchange treatment.

Assume that Julio has a capital loss carryover of $ 50,000 in the current tax year. Julio has no other capital gain transactions during the year. What amount of the capital loss may Julio deduct in the current year in the following situations?

The payment from Gray Corporation is a qualifying stock redemption for tax purposes.

The payment from Gray is a non-qualified stock redemption for tax purposes.

If Julio has the flexibility to structure the transaction as described in either part (a) or (b), which form would he choose?

Solutions

Expert Solution

Refer to the below images for the above mentioned requirements in a detailed way of solution.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Julio Gonzales is in the 33% tax bracket. He acquired 2,000 shares of stock in Gray...
Julio Gonzales is in the 33% tax bracket. He acquired 2,000 shares of stock in Gray Corporation seven years ago at a cost of $50 per share. In the current year, Julio received a payment of $150,000 from Gray Corporation in exchange for 1,000 of his shares in Gray. Gray has E & P of $1,000,000. What income tax liability would Julio incur on the $150,000 payment in each of the following situations? Assume that Julio has no capital losses....
Julio Gonzales is in the 32% tax bracket. He acquired 2,000 shares of stock in Gray...
Julio Gonzales is in the 32% tax bracket. He acquired 2,000 shares of stock in Gray Corporation seven years ago at a cost of $50 per share. In the current year, Julio received a payment of $150,000 from Gray Corporation in exchange for 1,000 of his shares in Gray. Gray has E & P of $1,000,000. What income tax liabil-ity would Julio incur on the $150,000 payment in each of the following situations? Assume that Julio has no capital losses....
Ronnie, who is in the 33% tax bracket this year, expects to retire next year and...
Ronnie, who is in the 33% tax bracket this year, expects to retire next year and be in the 25% tax bracket. He plans to donate $50,000 to his church. Because he will not have the case available until next year, Ronnie donates land (long term capital gain property) with a basis of $10,000 and fair market value of $50,000 to the church in December of the current year. He reacquires the land for $50,000 in February of next year....
Tern Corporation has 2,000 shares of stock outstanding: Marina owns 700 shares, Russell owns 600 shares,...
Tern Corporation has 2,000 shares of stock outstanding: Marina owns 700 shares, Russell owns 600 shares, Velvet Partnership owns 300 shares, and Yellow Corporation owns 400 shares. Marina and Russell, unrelated individuals, are equal partners of Velvet Partnership. Marina owns 25% of the stock in Yellow Corporation. a. Applying the § 318 stock attribution rules, determine how many shares in Tern Corporation each shareholder owns, directly and indirectly: Marina: Velvet Partnership: Russell: Yellow Corporation: b. Assume, instead, that Marina owns...
Osage Corporation issued 2,000 shares of stock. Prepare the entry for the issuance under the following...
Osage Corporation issued 2,000 shares of stock. Prepare the entry for the issuance under the following assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (a) The stock had a par value of $5 per share and was issued for a total of $52,000. (b) The stock had a stated value of $5 per share and...
Suppose your tax bracket is 33%. Would you prefer to earn a 6% taxable return of...
Suppose your tax bracket is 33%. Would you prefer to earn a 6% taxable return of a 4% tax-free yield from a muni? A. Municipal bond preferred B. Corporate Bond (taxable) preferred C. Because 6% and 5.97% are VERY close, the difference is small enough that the preference would hinge on other factors, while technically, you would prefer the 6% taxable return, which has a SLIGHTLY higher 4.02% after-tax return.
Silver Corporation has 2,000 shares of common stock outstanding. Howard owns 600 shares, Howard’s grandfather owns...
Silver Corporation has 2,000 shares of common stock outstanding. Howard owns 600 shares, Howard’s grandfather owns 300 shares, Howard’s mother own 300 shares, and Howard’s son owns 100 shares. In addition, Maroon Corporation owns 500 shares. Howard owns 70% of the stock in Maroon Corporation. a. Applying the §318 stock attribution rules, how many shares does Howard own in Silver Corporation? b. Assume that Howard owns only 40% of the stock in Maroon Corporation. How many shares does Howard own,...
On February 12, 2019 he received 2,000 shares of BRX, a Canadian public corporation from his...
On February 12, 2019 he received 2,000 shares of BRX, a Canadian public corporation from his late mother’s estate. His mother purchased these shares at a weighted average cost of $3.75 a share. The fair market value of these shares on the date of transfer was $5.50 per share. Allen purchased another 100 shares on March 5, 2019 at $4.85 a share. On April 1st the company paid out a stock dividend of 10%, which resulted in an increase in...
On February 12, 2019 he received 2,000 shares of BRX, a Canadian public corporation from his...
On February 12, 2019 he received 2,000 shares of BRX, a Canadian public corporation from his late mother’s estate. His mother purchased these shares at a weighted average cost of $3.75 a share. The fair market value of these shares on the date of transfer was $5.50 per share. Allen purchased another 100 shares on March 5, 2019 at $4.85 a share. On April 1st the company paid out a stock dividend of 10%, which resulted in an increase in...
Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of...
Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock over the years: Date Purchased Shares Basis 7/10/2008 480 $ 18,240 4/20/2009 380 16,644 1/29/2010 580 18,328 11/02/2012 330 12,276 If Dahlia sells 1,040 shares of Microsoft for $60,320 on December 20, 2018, what is her capital gain or loss in each of the following assumptions? (Do not round intermediate calculations.) b. She uses the specific identification method and she wants...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT