Elijah Owns 20% of Park Corporation's Single Class of Stock

question 44

Multiple Choice

Elijah owns 20% of Park Corporation's single class of stock. Elijah's basis in the stock is $8,000. Park's E&P is $28,000. If Park redeems all of Elijah's stock for $48,000, Elijah must report dividend income of

• A) $40,000.
• B) $0.
• C) $28,000.
• D) $48,000.

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Definitions:

Net Assets

The total assets of an entity minus its total liabilities, representing the entity's equity value or net worth.

Income Ratio

A financial metric that compares different streams of income to assess financial performance or profitability.

Capital Balances

Capital balances indicate the amount of equity a partner or shareholder has in a business, reflecting the net contributions and withdrawals, plus their share of profits or losses.

Income and Losses

Income and losses refer to the financial results of a company's operations, with income indicating profit and losses indicating expenses exceeding revenues.