A Corporation Is Owned 70% by Jones and 30% by Smith.Jones

question 79

Multiple Choice

A corporation is owned 70% by Jones and 30% by Smith.Jones owns 70 shares with a cost of $100 each.Smith owns 30 shares with a cost of $100 per share.The company redeems 5 shares from Smith at a redemption price of $400 per share.No stock is redeemed from Jones.This is not a redemption to pay death taxes,and it is not a partial liquidation.What is the tax impact on Smith?

• A)$2,000 dividend
• B)$2,000 capital gain
• C)$1,500 dividend
• D)$1,500 capital gain

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Definitions:

Social Security

A government program that provides financial assistance to people with an inadequate or no income, especially the elderly, disabled, and families with dependent children.

Unmarried Women

Refers to women who are not legally married, highlighting their social, legal, and economic status which varies historically and culturally.

Nonwhites

A term used to describe individuals not classified as white, often used in the context of discussing racial and ethnic diversity and disparities.

Solid South

A term historically used to describe the domination of the Democratic Party in the southern United States, particularly from the post-Civil War era until the mid-20th century.