Egret Corporation has manufactured recreational vehicles for 8 years.In addition,for the last 3 years,Egret has operated a separate division that sells bicycle equipment.Francis,an individual,and Loon Corporation each acquired 500 shares of stock in Egret (basis of $2,000 per share)10 years ago.In the current year,the bicycle equipment division is entirely destroyed by fire.Egret Corporation decides to discontinue the business and distributes pro rata all of the $5 million of insurance proceeds collected as a result of the fire to Francis and Loon Corporation in redemption of 200 shares of stock from each shareholder.Determine the tax consequences of the stock redemption to Egret Corporation (E & P of $6 million),to Francis,and to Loon Corporation.

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The Answer of Egret Corporation has manufactured recreational vehicles for 8 years.In addition,for the last 3 years,Egret has operated a separate division that sells bicycle equipment.Francis,an individual,and Loon Corporation each acquired 500 shares of stock in Egret (basis of $2,000 per share)10 years ago.In the current year,the bicycle equipment division is entirely destroyed by fire.Egret Corporation decides to discontinue the business and distributes pro rata all of the $5 million of insurance proceeds collected as a result of the fire to Francis and Loon Corporation in redemption of 200 shares of stock from each shareholder.Determine the tax consequences of the stock redemption to Egret Corporation (E & P of $6 million),to Francis,and to Loon Corporation.

Egret Corporation Has Manufactured Recreational Vehicles for 8 Years