Lupe and Rodrigo,father and Son,each Own 50% of the Stock

question 35

Multiple Choice

Lupe and Rodrigo,father and son,each own 50% of the stock outstanding of Heron Corporation (E & P of $400,000) .During the current year,Heron redeems all of Lupe's shares for $250,000.The transaction cannot qualify as a complete termination redemption if:

• A)Lupe filed an agreement with his return to notify the IRS of any prohibited interest acquired in the 10-year postredemption period.
• B)Lupe received a $250,000 note receivable from Heron in the stock redemption.
• C)Lupe continued to serve on Heron Corporation's board of directors for one year following the redemption.
• D)Lupe loaned Heron Corporation $50,000 two years following the redemption.
• E)More than one of the above is correct.

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Definitions:

Foreign Distribution Agreement

A legal contract between parties from different countries for the distribution of goods or services in a foreign market.

Political Risk Insurance

A type of insurance that provides financial protection to investors, firms, and projects from losses due to political events or actions in a given country.

Force Majeure Clause

A contract provision that frees parties from liability or obligation when an extraordinary event or circumstance beyond their control occurs.

Commercial Arbitration

A form of arbitration to resolve business disputes outside the courts, where the parties involved appoint an arbitrator(s).