Swallow, Inc

question 112

Essay

Swallow, Inc., is going to make a distribution of $700,000 to shareholder Marjean who is in the 35% tax bracket.
a. Determine the tax liability to Marjean if the form of the distribution is a dividend.
b. Determine the tax liability to Marjean if the form of the distribution is a stock redemption.
Assume Marjean's adjusted basis for the stock redeemed is $200,000 and that she has owned the stock for five years.

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Definitions:

Central Nervous System

Comprises the brain and spinal cord, responsible for processing information and controlling bodily functions.

Sedative

A class of drugs that slows brain activity, inducing relaxation or sleep.

Alpha and Theta Waves

Types of brain waves detected by EEG that are associated with different states of brain activity; alpha waves are linked to relaxed, wakeful states, while theta waves are often observed during light sleep and deep meditation.

Meditation

A practice where an individual uses a technique, such as mindfulness or focusing the mind on a particular object, thought, or activity, to train attention and awareness, and achieve a mentally clear and emotionally calm and stable state.