Problem - Broadbill Corporation (E & P of $650,000) has 1,000 shares of common stock outstanding. The shares are owned by the following individuals: Tammy, 300 shares; Yvette, 400 shares; and Jeremy, 300 shares. Each of the shareholders paid $50 per share for the Broadbill stock four years ago. In the current year, Broadbill Corporation distributes $75,000 to Tammy in redemption of 150 of her shares. Determine the tax consequences of the redemption to Tammy and to Broadbill under the following independent circumstances.
a. If Tammy and Jeremy are grandmother and grandson, Tammy will recognize Selecta long-term capital gain dividend income Correct 1 of Item 1 of $. Broadbill Corporation's E & P is reduced by $ , the amount of the dividend distribution.
b. If the three shareholders are siblings, then Tammy will recognize Selecta long-term capital gain dividend income Correct 1 of Item 2 of $. Broadbill Corporation's E & P is reduced by $ as a result of the distribution.