Sunset Corporation, with E & P of $400,000, makes a cash distribution of $120,000 to a shareholder. The shareholder’s basis in the Sunset stock is $50,000.
a. Determine the tax consequences to the shareholder if the distribution is a nonqualified stock redemption.
The shareholder has dividend income of $_____________.
b. Determine the tax consequences to the shareholder if the distribution is a qualifying stock redemption.
The shareholder has a capital gain of $______________.
c. Determine the tax consequences to the shareholder if the distribution is pursuant to a complete liquidation of Sunset.
The shareholder has a capital gain of $_______________.