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:

Domestic Abuse

A pattern of behavior in any relationship that is used to gain or maintain power and control over an intimate partner.

Increased Income

Refers to a situation where there is a rise in the amount of money earned from employment, investments, or other sources.

Empty Nest

A phase in a parent's life marked by the feelings of sadness or loss when their last child moves out of the family home, often leading to adjustments in lifestyle and relationships.

Diversity

The quality or state of having many different forms, types, ideas, or characteristics; often refers to the inclusion of people from various racial, ethnic, socio-economic, and demographic backgrounds.