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

question 105

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 20 shares from Jones at a redemption price of $400 per share.No stock is redeemed from Smith.This is not a redemption to pay death taxes,and it is not a partial liquidation.What is the tax impact on Jones?

• A)capital gain of $6,000
• B)capital gain of $8,000
• C)dividend income of $6,000
• D)dividend income of $8,000

---

Definitions:

Tolman

Edward Chace Tolman was an American psychologist who made significant contributions to the studies of learning and motivation, known for his cognitive behaviorist theory.

Relatively Permanent

Describes something that is long-lasting and stable over time, but not necessarily unchangeable.

Learning

The process of acquiring new understanding, knowledge, behaviors, skills, values, attitudes, and preferences.

Biofeedback Training

A technique that teaches individuals to improve their health by controlling certain bodily processes that normally happen involuntarily.