F Corporation Has 100 Shares of Outstanding Stock, All Owned

question 8

Multiple Choice

F Corporation has 100 shares of outstanding stock, all owned by J.J bought the shares 10 years ago for $20,000, or $200 per share.During the year, the corporation redeemed 10 shares of J's stock for $30,000.Which of the following is true?

• A)J must report a capital gain of $28,000.
• B)J must report a capital gain of $10,000.
• C)J must report dividend income of $28,000.
• D)J must report dividend income of $30,000.

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Definitions:

Interest Rate

The percentage charged on the total amount you borrow or earn on an investment, typically expressed annually.

Marketable Securities

Financial instruments that can be quickly converted into cash at a known price, such as stocks or bonds.

Optimal Initial Balance

The ideal starting amount of funds that maximizes the effectiveness or efficiency of a financial account or investment strategy.

BAT Model

Stands for the Best Alternative to a Negotiated Agreement; a benchmark used in negotiations to determine each party's alternative options if the current negotiations fail.