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ki77a [65]
3 years ago
10

Comet Company is owned equally by Pat and his sister Pam, each of whom hold 100 shares in the company. Comet redeems 50 of Pam's

shares on December 31, year 1, for $1,000 per share in a transaction that Pam treats as an exchange for tax purposes. Comet has total E&P of $250,000 on December 31, year 1. What are the tax consequences to Comet as a result of the stock redemption? A) No reduction in E&P as a result of the exchange. B) A reduction of $62,500 in E&P as a result of the exchange. C) A reduction of $50,000 in E&P as a result of the exchange. D) A reduction of $125,000 in E&P as a result of the exchange.
Business
1 answer:
lesantik [10]3 years ago
7 0

Answer:

Total E&P = $ 160000

Total voting Right Sold = 50/ (100+100) = 25%

Reduction of E& P due to exchange = Total E&P*Total voting Right Sold

Reduction of E& P due to exchange = 160000*25%

Reduction of E& P due to exchange = 40000

Reduction of E& P Lower of Total E&P*Total voting Right Sold or Amount realised

Reduction of E& P Lower of 40000 or (50*1000)

Reduction of E& P Lower of 40000 or 50000

Answer

A reduction of $40,000 in E&P because of the exchange.

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Answer and Explanation:

The journal entries are shown below"

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(Being issuance of the common stock is recorded)

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3 years ago
Show that Black-Scholes call option hedge ratios also increase as the stock price increases. Consider a 1-year option with exerc
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Answer:

Check explanation.

Explanation:

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explanation below

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It is fine to spend 20% of your time to know the employees that work with you in other to build outstanding relationships that would pay off in the future for you, your employees and your entire team.  

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