A Corporation Is Owned 70% by Jones and 30% by Smith.Jones

question 36

Multiple Choice

A corporation is owned 70% by Jones and 30% by Smith.Jones owns 70 shares with a cost of $100 each.Smith owns 30 shares with a cost of $100 per share.The company redeems 5 shares from Smith at a redemption price of $400 per share.No stock is redeemed from Jones.This is not a redemption to pay death taxes,and it is not a partial liquidation.What is the tax impact on Smith?

• A)$2,000 dividend
• B)$2,000 capital gain
• C) $1500 dividend
• D)$1,500 capital gain

Grasp the importance of the proxy system in shareholder voting and the regulations surrounding it.

Learn about shareholder proposals and the conditions under which they can be submitted.

Comprehend the concept of majority and minority shareholder rights, duties, and potential misconduct.

Recognize the protections offered by the business judgment rule and its limitations.

---

Definitions:

Debt Securities

Financial instruments representing money borrowed that must be repaid, including bonds, debentures, and notes.

Dividend Income

Earnings received from owning shares in a company, typically distributed from the company's profits.

Interest Earned

The income received from investments, savings, or as interest payments from loans.

Reporting Currency

The currency used in financial statements to represent an entity's financial performance and position, often the national currency where the company is domiciled.