Qualify for sale or exchange treatment


Problem: Five years ago, Eleanor transferred property she had used in her sole proprietorship to Blue Corporation for 1,000 shares of Blue Corporation in a transaction that qualified under § 351. The assets had a tax basis to her of $400,000 and a fair market value of $550,000 on the date of the transfer. In the current year, Blue Corporation (E & P of $1 million) redeems 100 shares from Eleanor for $290,000 in a transaction that does not qualify for sale or exchange treatment. With respect to the redemption, Eleanor will have a:

a. $250,000 dividend.

b. $290,000 dividend.

c. $250,000 capital gain.

d. $290,000 capital gain.

e. None of the above.

Solution Preview :

Prepared by a verified Expert
Accounting Basics: Qualify for sale or exchange treatment
Reference No:- TGS01931277

Now Priced at $20 (50% Discount)

Recommended (95%)

Rated (4.7/5)