Half Moon Corporation Made a Distribution of $300,000 to Arnold

question 84

Essay

Half Moon Corporation made a distribution of $300,000 to Arnold Swartz in partial liquidation of the company on December 31, 20X3. Arnold owns 100percent of Half Moon Corporation (1,200 shares). The distribution was in exchange for 50percent of Arnold's stock in the company (600 shares). At the time of the distribution, the shares had a fair market value of $500 per share. Arnold's income tax basis in the shares was $250 per share. Half Moon had total E&P of $2,000,000 at the time of the distribution. What is the amount and character (capital gain or dividend)of any income or gain recognized by Arnold as a result of the partial liquidation?

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Definitions:

Overlooking Wrongdoings

The act of ignoring or failing to address unethical or improper behavior within an organization or group.

Formal Codes

Formal codes are established guidelines or systems of rules, often written, that dictate the expected conduct or procedures within an organization or community.

Ethics

Principals that define right and wrong behavior in conducting one’s personal and professional life.

Workforce Diversity

Describes differences among workers in gender, race, age, ethnic culture, able‐bodiedness, religious affiliation, and sexual orientation.