Question

A, B and C own stock of Randall Corporation (E & P $1,000,0000) as follows:

A owns 600 shares, B owns 400 shares and C owns 1000 shares. Randall redeems 500 shares of C for $300,000. C paid $1 per share several years ago.

Calculate the effect on C for this redemption

Pre Redemption Post Red

a

b

c

Answer 1

		No of Shares	% of Holding	Post Redemption	% of Holding
	A	600.00	30.00	600.00	40.00
	B	400.00	20.00	400.00	26.67
	C	1,000.00	50.00	500.00	33.33
	total Shares	2,000.00		1,500.00
	Capital Gain
	Selling Price of the Shares		300,000.00
	Purchase Price of Shares
	$1*500		500.00
		Capital Gain	299,500.00
	Effect on C
	C had a Capital gain of $ 299,500 on redemption
	Pre Redemption C had a share holding of 50 % in the Randall Corporation post redemption his share holding reduce to 33.33%