Julian, Berta, and Maria Own 400 Shares, 400 Shares, and 200

question 116

Multiple Choice

Julian, Berta, and Maria own 400 shares, 400 shares, and 200 shares, respectively, in Caramel Corporation (E & P of $750,000) . Berta is Julian's sister, and Maria is Julian's aunt. Caramel Corporation redeems all of Julian's stock for
$420,000. Julian paid $200 a share for the stock five years ago. Julian continued to serve on Caramel's board of directors after the redemption. With respect to the redemption:

• A) Dividend income is $340,000.
• B) Dividend income is $420,000.
• C) Long-term capital gain is $340,000.
• D) Long-term capital gain is $420,000.
• E) None of these.

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Definitions:

34 Percent

A numerical value representing a fraction, more than one-third, of a whole in a quantitative context, such as statistical data.

Metacognitive Theory

A theory that focuses on how individuals process information, making them aware of how they learn, remember, problem-solve, and think.

Avoidance Theory

A psychological theory suggesting that individuals may take actions to avoid unpleasant experiences, situations, or emotions.

Generalized Anxiety Disorder

Generalized Anxiety Disorder is characterized by persistent and excessive worry about various aspects of daily life, not tied to any specific threat.