Jack Corporation Redeems 200 Shares of Its Stock for $100,000

question 92

Multiple Choice

Jack Corporation redeems 200 shares of its stock for $100,000 from Junior, who inherited the stock from his father, Ken. The stock's FMV on Ken's date of death was $90,000. Ken's basis in the stock was $40,000. Jack Corporation had an E&P balance of $300,000. If the redemption qualifies under Sec. 303, Junior will

• A)recognize a capital gain of $10,000.
• B)recognize a capital gain of $60,000.
• C)recognize $100,000 in dividend income.
• D)recognize dividend income of $50,000 and a capital gain of $10,000.

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Definitions:

Cholecystolithiasis

An abnormal presence of stones in the gallbladder.

Gallstones

Hardened deposits of digestive fluid that can form in the gallbladder, causing pain, nausea, and sometimes leading to more serious conditions like pancreatitis.

Glomerulonephritis

A category of kidney disease characterized by inflammation of the glomeruli, which are small blood vessels in the kidneys.

Nephrons

The functional units of the kidney, responsible for the filtration and excretion process.