Answer:
a. Brandi's tax liability on the distribution is $23,250
b. Yuen's tax liability on the distribution is $30,000
Explanation:
Given
Amount = $200,000
Tax bracket = 33%
Redeem Stock = $45,000 basis
a.
First, we calculate the taxable dividend.
Taxable dividend is calculated by subtracting the redeemed stock from the total amount.
Taxable dividend = Amount - Redeemed Stock
Taxable dividend = $200,000 - $45,000
Taxable dividend = $155,000
Brandi's tax liability on the distribution is calculated as: Taxable dividend * tax rate
Tax liability = $155,000 * 15%
Tax liability = $23,250
Hence, Brandi's tax liability on the distribution is $23,250
b. With an assumption that the distribution to Yuen is a nonqualified stock redemption.
Yuen's tax liability on the distribution is calculated as follows;
Tax liability = Amount * Tax rate
Tax liability = $200,000 * 15%
Tax liability = $30,000
Hence, Yuen's tax liability on the distribution is $30,000
