IDsA (1o points)Donald Trump owns 900 shares of Rosie Corporation stock Total lx
ID: 2561382 • Letter: I
Question
IDsA (1o points)Donald Trump owns 900 shares of Rosie Corporation stock Total lx Coporation stock are 1500, The other 600 shnres ure owned by individunl Corp. has t of si mitlion. Rosie Corp redeems 450 shares of Donnld's stoing ps dueir pubilie paid $200.000 for the 450 shares 5 years ngo when Rosie joined the iow d Rosie hav take off with the added exposure Rosie would receive on television. Since iis talling out, he is looking to have a smaller investment in the corporation shares outstanding in Rosie not related to the Donald. Rosie 0,000. Donald hnd stock would Rosie have h Plense tell me: Please explain a) (7 points) If th your reasoning b) (3 points) How much dividend income or cupital gain Donald will have to t is redemption will receive sale of exchange treatment, or dividend treatment.Explanation / Answer
a. In the given case, it is not a distribution rather it is redemption which will atract sale or exchange treatment.
Distribution out of E&P will attract dividend treatment, here shares of donald are redeemed hence it is not a case of distribution.
b. Capital gain = Fair market value of consideration received- cost= 450000-200000= 250000