Martin owns 10% of the outstanding shares of Disel Corporation, and he is not re

ID: 2396753 • Letter: M

Question

Martin owns 10% of the outstanding shares of Disel Corporation, and he is not related to any other shareholders. His basis in the Disel stock is $20,000. On December 31 of 2017, Disel purchased all of Martin’s shares for $150,000 in cash. The corporation’s accumulated earnings and profits on January 1, 2017 were $800,000, and current earnings and profits are $120,000. Martin’s has owned his stock since Disel was incorporated in 2006. Explain the tax consequences of this transaction for Martin and Disel Corporation. Martin owns 10% of the outstanding shares of Disel Corporation, and he is not related to any other shareholders. His basis in the Disel stock is $20,000. On December 31 of 2017, Disel purchased all of Martin’s shares for $150,000 in cash. The corporation’s accumulated earnings and profits on January 1, 2017 were $800,000, and current earnings and profits are $120,000. Martin’s has owned his stock since Disel was incorporated in 2006. Explain the tax consequences of this transaction for Martin and Disel Corporation.

Explanation / Answer

For Martin: He has to pay long term capital gain tax. The tax would depend upon the tax bracket of the shareholders total income.

for Corporation: corporation has not tax effects of the transaction.

Navigate

Martin made an oral contract with Cresheim Garage to work as its manager for two

Martin purchased a 10 year U.S. Treasury bond about the same time as his friend

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.

Martin owns 10% of the outstanding shares of Disel Corporation, and he is not re

Question

Explanation / Answer

Related Questions

Navigate