Joe owns 40 percent of the stock of AD Corporation's 2,000 outstanding shares.If Joe sells some stock back to the corporation, what is the maximum percentage of ownership that Joe can have of the outstanding stock after the sale to qualify for capital gain treatment rather than having dividend income?

Question

Quizplus · Accepted Answer

To qualify for capital gain treatment, Joe's ownership must be reduced by more than 20% of his original ownership percentage. Joe originally owns 40%, so he must own less than 32% after the sale (40% - 20% of 40% = 32%). Therefore, the maximum percentage he can own is 31.9%.

Joe Owns 40 Percent of the Stock of AD Corporation's