Question Continuation
Determine the tax consequences of the redemption to Tammy and to Broadbill under the following independent circumstances.
Tammy and Jeremy are grandmother and grandson.
Answer:
See Explanation Below
Explanation:
Given.
Tammy number of shares = 300
Yvette number of shares = 400
Jeremy number of shares = 300
Each of the shareholders paid $50 per share.
Tammy's Ownership is calculated by; (300+300)/1000
= 600)1000
= 60% ---- before redemption
Tammy's Ownership = (150 + 300)/850
Tammy's ownership = 450/850
Tammy's Ownership = 52.94% ---- after redemption
The constructive ownership of Tammy is more than 80%, this means that the distribution is considered as income to Tammy
Answer:
$100
Explanation:
Alto's share value = (2,400 × $24) = $57,600
Alto's total value = Share value + Incremental value of acquisition = $57,600 + $5,500 = $63,100
Net present value (NPV) = Alto's total value - Cost of acquisition = $63,100 - $63,000 = $100
Therefore, the net present value of acquiring Alto to Solo is $100.
