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.

Understand reporting and accounting for debt investments.

Grasp the accounting treatments for investments in associates and bonds, including amortization and its impact.

Identify the criteria for the classification of investments as current assets and the valuation at fair value.

Analyze the reporting requirements for trading investments, including the treatment of dividends and gains/losses.

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Definitions:

Hodgkin Disease

A type of lymphoma characterized by the presence of Reed-Sternberg cells, leading to the abnormal growth of cells in the lymphatic system.

Lymphoma

A type of cancer that begins in the lymphatic system, particularly in lymphocytes, a type of white blood cell.

Seminoma

A type of testicular cancer that arises from sperm-producing cells, known for its responsiveness to radiation therapy.

Testis

One of the two male reproductive glands that produce sperm and secrete hormones, including testosterone.