Four unrelated shareholders own Archer Corporation\'s 1,100 shares of outstandin

Question

Four unrelated shareholders own Archer Corporation's 1,100 shares of outstanding stock. As indicated below, Archer redeems a total of 140 shares for $ 650, per share from three of its shareholders. Each shareholder has a $ 260 per share basis in his or her stock. Benton's current and accumulated E&P at the end of the tax year is $ 160,000

A. What are the tax consequences (e.g., basis of remaining shares and amount and character of recognized income, gain, or loss) of the redemptions to Barb, Susan and Kim?

B. How would your answer change if Barb were Kim’s mother?

Explanation / Answer

For the first instance the stock redemption will takes place,if the following conditions are satisfied

If the company terminates shareholders's stake

If the company substantially disproportinate

If its not in a postion to pay dividened etc

A.The tax consequences are based on the relevenat portion of shareholding on redemption.If it is does not significantly then there wont be any tax consequences and if there is a siginificant change then there arises a capital gain leads the taxble income .

B.here the the percentage of shareholding of Barb,Susan,Kim were not mentioned.so It can be answered based on that.

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