Ameriparent Corporation Owns a 70% Interest in Flag Corporation

question 68

Essay

Ameriparent Corporation owns a 70% interest in Flag Corporation. The corporations have current and accumulated E&Ps of $25,000 and $40,000, respectively. Taxpayer, who has a $20,000 basis in her 40% ownership interest of Ameriparent Corporation, sells sufficient stock to Flag to reduce her interest in Ameriparent from 40% to 20%. Taxpayer receives $20,000 for the stock she surrenders. What are the tax consequences of the transaction for Taxpayer?

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Definitions:

Gene

A unit of heredity made up of DNA that is responsible for the physical and inheritable characteristics or phenotype of an organism.

Gene Pool

The total variety of genetic information possessed by a sexually reproducing population.

Genetic Information

The hereditary material in the form of DNA sequences that codes for the biological characteristics of organisms.

Germ Cells

The reproductive cells that give rise to sperm and ova, containing half the genetic material of other body cells.