Viking Corporation is owned equally by Sven and his wife Olga, each of whom hold 100 shares in the company. Viking redeemed 75 shares of Sven's stock in the company on December 31, year 1. Viking paid Sven $2,000 per share. His income tax basis in each share is $1,000. Viking has total E&P (current plus accumulated) of $500,000. What are the tax consequences to Sven as a result of the stock redemption? A) $75,000 capital gain and a tax basis in each of his remaining shares of $2,000. B) $150,000 dividend and a tax basis in each of his remaining shares of $4,000. C) $150,000 dividend and a tax basis in each of his remaining shares of $1,000. D) $75,000 capital gain and a tax basis in each of his remaining shares of $1,000.

Question

Emilee Moon

Business

13 October, 11:05

Viking Corporation is owned equally by Sven and his wife Olga, each of whom hold 100 shares in the company. Viking redeemed 75 shares of Sven's stock in the company on December 31, year 1. Viking paid Sven $2,000 per share. His income tax basis in each share is $1,000. Viking has total E&P (current plus accumulated) of $500,000. What are the tax consequences to Sven as a result of the stock redemption? A) $75,000 capital gain and a tax basis in each of his remaining shares of $2,000. B) $150,000 dividend and a tax basis in each of his remaining shares of $4,000. C) $150,000 dividend and a tax basis in each of his remaining shares of $1,000. D) $75,000 capital gain and a tax basis in each of his remaining shares of $1,000.

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Answers (1)

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Anthony Ballard · Answer 1

Answer: D. $75000 capital gain and a Tax basis in each of his remaining shares of $1000

Explanation:

Sven Paid $1000 per share, He sold 75 shares back to the company at a price of $2000 per share thus making a capital profit of $ 1000 x 75 = $ 75000

Tax consequences for Sven regarding share redemption is the capital of $75000 and a tax basis in each of his remaining shares of $1000