Phil owns 80 of the 100 outstanding shares of B Corp., while the remaining share
ID: 2815216 • Letter: P
Question
Phil owns 80 of the 100 outstanding shares of B Corp., while the remaining shares are owned by unrelated parties. He also owns 90 of the 100 outstanding shares of S Corp. During the year, Phil sold 40 shares of B to S for $30,000. In applying the rules governing redemptions through related corporations, what percentage is Phil deemed to own immediately after the sale? Phil owns 80 of the 100 outstanding shares of B Corp., while the remaining shares are owned by unrelated parties. He also owns 90 of the 100 outstanding shares of S Corp. During the year, Phil sold 40 shares of B to S for $30,000. In applying the rules governing redemptions through related corporations, what percentage is Phil deemed to own immediately after the sale?Explanation / Answer
Phil has 80 shares out of 100 in B corp. (80%)
Phil has 90 shares out of 100 in C corp, (90%)
He sold 40 shares from B corp to S corp.
So, now in B corp he has 40 shares (80-40) out of 60 shares (100-40) which equals to 66.67% (40/60*100)
In S corp. he held 90% share, so from remaining 40 shares which comes in S corp, Phil will have 36 shares (40*90%). So, he holds 126 shares (90+36) in S corp out of 140 shares (100+40) which equals to 90% (126/140*100)
So, Phil has total % of shares =
(B corp + S corp)/2
= (66.67 + 90)/2
= 78.33%