Bonnie and Clyde are the only two shareholders in Getaway Corporation. Bonnie owns 60 shares with a basis of $7,300, and Clyde owns the remaining 40 shares with a basis of $16,000. At year-end, Getaway is considering different alternatives for redeeming some shares of stock. (Round your answers to the nearest whole number.)
a. Getaway redeems 18 of Bonnie’s shares for $6,000. Getaway has $28,000 of E&P at year-end and Bonnie is unrelated to Clyde.
Bonnie owns 60% before the redemption and _______% after the redemption.
Does this qualify as a sale or exchange? If so, how much is the gain?
b. Getaway redeems 33 of Bonnie’s shares for $12,000. Getaway has $28,000 of E&P at year-end and Bonnie is unrelated to Clyde.
Bonnie owns 60% before the redemption and _______% after the redemption.
Does this qualify as a sale or exchange? If so, how much is the gain?
c. Getaway redeems 6 of Clyde’s shares for $6,500. Getaway has $28,000 of E&P at year-end and Clyde is unrelated to Bonnie.
Bonnie owns 40% before the redemption and _______% after the redemption.
Does this qualify as a sale or exchange? If so, how much is the gain?