John Owns 70% of the May Corporation Stock and 60

question 5

Multiple Choice

John owns 70% of the May Corporation stock and 60% of the June Corporation stock. John sells one-half of his interest in May Corporation to June Corporation for $45,000. The E&P accounts of May and June are $25,000 and $35,000, respectively. The result would be that

• A)John has sold his stock and reports a capital gain or loss.
• B)John has sold his stock and reports a capital gain but no loss.
• C)the transaction is treated as a contribution to May's capital and a redemption of June stock.
• D)the sale is recast as a dividend paid to John, first by June and then by May.

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Definitions:

Major Rule

A significant regulatory measure or policy that has a large impact on the economy, society, or government operations.

Administrative Rule

Regulations issued by government agencies to implement laws, detailing the standards and procedures for enforcement of those laws.

ALJs

Administrative Law Judges are officials who preside over hearings and dispute resolutions involving federal regulatory agencies.

Professional Merit Selection

A system of appointment based on qualifications and performance rather than political connections or personal favoritism.