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JLcpa
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Regular

Joined: 22 Sep 2009
Online Status: Offline
Posts: 202

Posted: 27 May 2011 at 18:58 \| IP Logged

1. Where a Corp gives property as dividend, the Shareholder will:
recognize dividend to the extent of E&P,
beyond E&P- it will reduce his basis & is tax-free
beyond basis- he will treat it as Capital Gain.
Will the shareholder show the property in his B/S? If so, at what basis? Will it be FMV of property received?

2. Stock redemption: If a Shareholder had $200000 worth of stock before the redemption, and the Corp redeemed 10% of his stock by giving him property, what is the new value of his stock? I saw a question in Gleim where it remains at 200000 after the redemption. Is that correct?

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Jas, Jersey City, NJ
AUD- 18 Nov 2009- 86
FAR- 28 Jan 2010- 91
BEC- 26 Feb 2010- 87
REG- May 2011- 78

1tryCPA
Major Contributor

Joined: 27 Jun 2010
Online Status: Offline
Posts: 337

Posted: 27 May 2011 at 22:01 \| IP Logged

Property basis for SH would be always greater FMV or liability assumed.

For partial redemption when conditions are not met for capital G/L, all distributions are treated as dividends, and dividends have no effect on basis of his stock.

If partial redemption and after redemption SH owns less than 50% of total shares and less then 80% of what he owned before redemption, then, it would G/L.

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FAR - 07/09/10 - {95}
AUD - 10/02/10 - {96}
BEC - 11/29/10 - {92}
REG - 05/23/11 - {75 would be enough}90 unbelievable, and I AM DONE!!!
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JLcpa
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Joined: 22 Sep 2009
Online Status: Offline
Posts: 202

Posted: 27 May 2011 at 22:20 \| IP Logged

Thanks again!

__________________
Jas, Jersey City, NJ
AUD- 18 Nov 2009- 86
FAR- 28 Jan 2010- 91
BEC- 26 Feb 2010- 87
REG- May 2011- 78

JLcpa
Regular
Regular

Joined: 22 Sep 2009
Online Status: Offline
Posts: 202

Posted: 27 May 2011 at 22:21 \| IP Logged

1tryCPA, since you are done with your exams, can you tell me if we are able to check out the IRC section numbers in the Auth Lit tab for SIMS?

__________________
Jas, Jersey City, NJ
AUD- 18 Nov 2009- 86
FAR- 28 Jan 2010- 91
BEC- 26 Feb 2010- 87
REG- May 2011- 78

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