Comet Company is owned equally by Pat and his sister Pam, each of whom hold 165 shares in the company. Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 83 of her shares for $1,660 per share on December 31, 20X3. Pam's income tax basis in each share is $700. Comet has total E&P of $330,000. What are the tax consequences to Pam because of the stock redemption? Multiple Choice $79,680 capital gain and a tax basis in each of her remaining shares of $700. $79,680 capital gain and a tax basis in each of her remaining shares of $165. $137,780 dividend and a tax basis in each of her remaining shares of $165. $137,780 dividend and a tax basis in each of her remaining shares of $83.
Comet Company is owned equally by Pat and his sister Pam, each of whom hold 165 shares in the company. Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 83 of her shares for $1,660 per share on December 31, 20X3. Pam's income tax basis in each share is $700. Comet has total E&P of $330,000. What are the tax consequences to Pam because of the stock redemption? Multiple Choice $79,680 capital gain and a tax basis in each of her remaining shares of $700. $79,680 capital gain and a tax basis in each of her remaining shares of $165. $137,780 dividend and a tax basis in each of her remaining shares of $165. $137,780 dividend and a tax basis in each of her remaining shares of $83.
Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation
Section: Chapter Questions
Problem 35P
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Transcribed Image Text:Comet Company is owned equally by Pat and his sister Pam, each of whom hold 165 shares in the company. Pam wants to reduce her ownership in the
company, and it was decided that the company will redeem 83 of her shares for $1,660 per share on December 31, 20X3. Pam's income tax basis in each
share is $700. Comet has total E&P of $330,000. What are the tax consequences to Pam because of the stock redemption?
Multiple Choice
$79,680 capital gain and a tax basis in each of her remaining shares of $700.
$79,680 capital gain and a tax basis in each of her remaining shares of $165.
$137,780 dividend and a tax basis in each of her remaining shares of $165.
$137,780 dividend and a tax basis in each of her remaining shares of $83.
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