Dave, Erica, and Faye Are All Unrelated

question 42

Essay

Dave, Erica, and Faye are all unrelated. Each has owned 100 shares of News Corporation stock for five years and each has a $180,000 basis in those 100 shares. News Corporation's E&P is $720,000. News redeems all 100 of Dave's shares for $300,000, their FMV.
a)What is the amount and character of Dave's recognized gain or loss? What basis do Erica and Faye have in their remaining shares? What effect does the redemption have on News's E&P?
b)Assuming instead that Dave is Erica's son, answer the questions in part (a)again.

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Definitions:

Stereochemical Detail

Pertains to the 3D arrangement of atoms within a molecule and how it influences the behavior and reactivity of the molecule.

Organic Product(s)

Chemical compounds composed mainly of carbon and hydrogen, which are the synthesized or natural result(s) of organic reactions.

Regio-

A prefix indicating the region or position in a molecule where a chemical reaction occurs, often used in chemistry to describe regioselectivity.

Stereochemical Detail

Information pertaining to the spatial arrangement of atoms within a molecule, including aspects of chirality, conformation, and configuration.