Hannah, Greta, and Winston Own the Stock in Redpoll Corporation

question 66

Multiple Choice

Hannah, Greta, and Winston own the stock in Redpoll Corporation (E & P of $900,000) as follows: Hannah, 600 shares? Greta, 400 shares? and Winston, 1,000 shares. Greta is Hannah's daughter, and Winston is Hannah's brother. Redpoll Corporation redeems 400 of Hannah's shares (basis of $55,000) for $240,000. Hannah purchased the stock three years ago as an investment. With respect to the stock redemption, Hannah has:

• A) Long-term capital gain of $185,000.
• B) Long-term capital gain of $240,000.
• C) Dividend income of $185,000.
• D) Dividend income of $240,000.
• E) None of the above.

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Definitions:

Charter

A document that establishes the principles, functions, and organization of a corporation or city.

Incorporation Papers

are legal documents filed with a governmental body to legally document the creation of a corporation.

Corporation Powers

The legal rights endowed to a corporation, allowing it to act as a single entity and carry out its business.

Statutory Norms

Established standards or rules set forth in laws enacted by legislative bodies.