Ashley, the Sole Shareholder of Hawk Corporation, Has a Stock

question 22

Essay

Ashley, the sole shareholder of Hawk Corporation, has a stock basis of $200,000 at the beginning of the year. On July 1, she sells all of her stock to Matt for $1 million. On January 1, Hawk has accumulated E & P of $90,000 and during the year, current E & P of $160,000. Hawk makes the following cash distributions: $270,000 to Ashley on March 31 and $90,000 to Matt on December 1. How are the distributions taxed to Ashley and Matt? What is Ashley's recognized gain on the sale to Matt?

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Definitions:

Grandiose Plans

Highly ambitious or idealistic plans that may be unrealistic or difficult to achieve.

Unrestrained Exuberance

An overflow of high spirits or unchecked enthusiasm, potentially leading to lack of self-control or caution.

Mania

A mental health condition characterized by excessively elevated mood, energy levels, and, in some cases, delusions or hallucinations, often associated with bipolar disorder.

Antisocial Personality

A personality disorder characterized by a long-term pattern of disregard for, or violation of, the rights of others, often manifesting in criminal behavior.