Swallow, Inc

question 112

Essay

Swallow, Inc., is going to make a distribution of $700,000 to shareholder Marjean who is in the 35% tax bracket.
a. Determine the tax liability to Marjean if the form of the distribution is a dividend.
b. Determine the tax liability to Marjean if the form of the distribution is a stock redemption.
Assume Marjean's adjusted basis for the stock redeemed is $200,000 and that she has owned the stock for five years.

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Definitions:

Cognitive Schema

Mental structures that an individual uses to organize knowledge and guide cognitive processes and behavior.

Stereotype

A widely held but fixed and oversimplified image or idea of a particular type of person or thing.

Mindlessness

A state of reduced cognitive awareness or engagement, where actions or reactions are performed habitually without thoughtful consideration.

Milgram's Obedience Study

A psychological experiment conducted by Stanley Milgram in the 1960s to study the extent to which individuals would obey an authority figure when instructed to perform acts conflicting with their personal conscience.