Pursuant to a Qualifying Stock Redemption, Redbird Corporation (E

question 91

Multiple Choice

Pursuant to a qualifying stock redemption, Redbird Corporation (E & P of $400,000) transfers land held for investment purposes to Bob, a 10% shareholder. On the date of the distribution, Redbird has a basis of $200,000 in the land and its fair market value is $150,000. Bob has a basis of $40,000 in the shares redeemed. With respect to the redemption:

• A) Bob will recognize a gain of $110,000.
• B) Bob will have $150,000 of dividend income.
• C) Bob will have a $200,000 basis in the land.
• D) Redbird Corporation will recognize a capital loss of $50,000.
• E) None of the above.

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Definitions:

Price Terms

Conditions and details regarding the cost of goods or services being offered or negotiated, including payment amounts, schedules, and any potential for adjustments.

Sales Contract

A formal agreement between a buyer and seller specifying the terms and conditions under which goods or services will be sold and purchased.

Fixed Price

A set price that does not change, regardless of variations in market conditions or costs of production.

UCC

An extensive assembly of legal norms, the Uniform Commercial Code, presides over the entirety of commercial exchanges in the United States.