Hailey Redeems Some of the Stock She Holds in Mallard

question 109

Multiple Choice

Hailey redeems some of the stock she holds in Mallard Corporation for $300,000.The stock has a basis to her of $100,000 and has been held by her as an investment for many years.Mallard Corporation has more than $2 million in earnings and profits.In the year of the redemption,Hailey is in the 33% income tax bracket.The redemption generates a tax of:

• A) $99,000 if it does not qualify for sale or exchange treatment.
• B) $45,000 if it does not qualify for sale or exchange treatment.
• C) $45,000 if it does qualify for sale or exchange treatment.
• D) $66,000 if it does qualify for sale or exchange treatment.
• E) None of the above.