Ethel, Hannah, and Samuel, Unrelated Individuals, Own the Stock in Broadbill

question 94

Multiple Choice

Ethel, Hannah, and Samuel, unrelated individuals, own the stock in Broadbill Corporation (E & P of $700,000) as follows: Ethel, 300 shares; Hannah, 300 shares; and Samuel, 400 shares. Broadbill redeems 200 of Samuel's shares (basis of $175,000) for $250,000. If Samuel's stock is a capital asset and has been held for over three years, Samuel has:

• A) A long-term capital gain of $75,000.
• B) A short-term capital gain of $75,000.
• C) Ordinary income of $250,000.
• D) Ordinary income of $75,000.
• E) None of these.

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Definitions:

Sample Mean

The average value of a set of observations derived from a sample.

Standard Deviation

An indicator of the spread or distribution range of a collection of data points, showing how far apart the values in the set are from each other.

Margin of Error

The maximum amount by which the sample results are expected to differ from the true population value.

Normally Distributed

Describes a distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.