Dave, Erica, and Faye Are All Unrelated

question 19

Essay

Dave, Erica, and Faye are all unrelated. Each has owned 100 shares of News Corporation stock for five years and has a $180,000 basis in those 100 shares. News Corporation's E&P is $720,000. News redeems all 100 of Dave's sh
$300,000, their FMV.
a) What is the amount and character of Dave's recognized gain or loss? What basis do Erica and Faye have in th remaining shares? What effect does the redemption have on News's E&P?
b) Assuming instead that Dave is Erica's son, answer the questions in part (a) again.

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Definitions:

Opportunity Presented

A situation or condition that makes it possible to do something that one wants to do or has to do.

Admit

To confess or acknowledge something, often reluctantly.

Sense of Self-efficacy

The belief in one's own ability to succeed in specific situations or accomplish a task.

Cope

The process of effectively dealing with stress or adversity through various strategies or mechanisms.