e Corporation has a single class of common stock outstanding. Joe owns 450 shares, which he purchased for $60 per share two years ago. On April 10 of the current year, Hope reholders one right to purchase for $65 one common share for each common share owned. At the time of the distribution, each common share is worth $80, and each right is wor 225 rights for $3,000 and exercises the remaining 225 rights. On November 10, he sells for $85 each 63 of the shares acquired through exercise of the rights.
e Corporation has a single class of common stock outstanding. Joe owns 450 shares, which he purchased for $60 per share two years ago. On April 10 of the current year, Hope reholders one right to purchase for $65 one common share for each common share owned. At the time of the distribution, each common share is worth $80, and each right is wor 225 rights for $3,000 and exercises the remaining 225 rights. On November 10, he sells for $85 each 63 of the shares acquired through exercise of the rights.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter13: Corporations: Earning & Profits And Distributions
Section: Chapter Questions
Problem 31P
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Transcribed Image Text:Hope Corporation has a single class of common stock outstanding. Joe owns 450 shares, which he purchased for $60 per share two years ago. On April 10 of the current year, Hope distributes to its common
shareholders one right to purchase for $65 one common share for each common share owned. At the time of the distribution, each common share is worth $80, and each right is worth $20. On September 10, Joe
sells 225 rights for $3,000 and exercises the remaining 225 rights. On November 10, he sells for $85 each 63 of the shares acquired through exercise of the rights.
Requirement a. What are the amount and character of income Joe recognizes upon receiving the rights? (Enter a "0" for a zero amount. If the amount is zero, select "n/a" in the character column.)
Joe
Amount of
income
Character of
income
Requirement b. What are the amount and character of gain or loss Joe recognizes upon selling the rights? (Round all intermediary calculations to two decimal places and your final answer to the nearest cent.
Enter a "0" for a zero amount. If the amount is zero, select "n/a" in the character column.)
Joe
Amount of gain Character of gain
or loss
or loss
Requirement c. What are the amount and character of gain or loss Joe recognizes upon exercising the rights? (Enter a "0" for a zero amount. If the amount is zero, select "n/a" in the character column.).
Joe
Amount of gain or Character of gain
loss
or loss
Requirement d. What are the amount and character of gain or loss Joe recognizes upon selling the newly acquired common shares? (Round all intermediary calculations and your final answer to the nearest
cent. Enter a "0" for a zero amount. If the amount is zero, select "n/a" in the character column.)
Joe
Amount of gain Character of gain
or loss
or loss
Requirement e. What basis does Joe take in his remaining shares? (Enter your answers to the nearest cent.)
Joe's basis in his original 450 shares is
Joe's basis in his remaining shares purchased with the rights is
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