Comet Corporation Is Owned Equally by Patrick and His Sister

question 107

Multiple Choice

Comet Corporation is owned equally by Patrick and his sister Pam, each of whom hold 100 shares in the company.Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 50 of her shares for $1,000 per share on December 31, year 1.Pam's income tax basis in each share is $500.Comet has total E&P of $250,000.What are the tax consequences to Pam as a result of the stock redemption?

• A)$25,000 capital gain and a tax basis in each of her remaining shares of $500.
• B)$25,000 capital gain and a tax basis in each of her remaining shares of $100.
• C)$50,000 dividend and a tax basis in each of her remaining shares of $100.
• D)$50,000 dividend and a tax basis in each of her remaining shares of $50.

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Definitions:

Postmodern

A theoretical stance critiquing the grand narratives and ideologies of modernism, highlighting the complexity of truth and the plurality of realities.

Premodern

Referring to the period or aspects of society before the modern era, characterized by traditional, often agrarian societies.

Subculture

A cultural group within a larger culture, often with beliefs or interests at variance with those of the larger culture.

Dominant Culture

The set of cultural practices, beliefs, and values that are predominately observed, valued, and practiced within a society.