The outstanding stock of Riccardo Corporation is owned as follows: $\begin{array}{ll}
\text { Robert } & 100 \text { shares } \
\text { Megan (Robert's daughter) } & 100 \text { shares } \
\text { Kyle (Robert's cousin) } & 100 \text { shares } \
\text { RMD, Inc. } & 100 \text { shares }\
\text { Total shares outstanding }& 400 \text { shares }\
\end{array}$ Robert owns 50% of RMD, Inc. stock. The rest of RMD, Inc. stock is owned by unrelated parties. Riccardo Corporation redeems 90 of Kyle's shares of stock for $9,000 in the only redemption transaction this year. Kyle's basis for his stock is $10 per share. Riccardo Corporation has $300,000 in E&P. What is Kyle's total basis in his remaining 10 shares of stock after the redemption?

Question

Quizplus · Accepted Answer

Kyle's basis in his remaining shares is calculated by reducing his original basis by the basis of the redeemed shares. His original basis was $1,000 (100 shares x $10). The basis of the redeemed shares is $900 (90 shares x $10). Therefore, his basis in the remaining 10 shares is $100 ($1,000 - $900).

The Outstanding Stock of Riccardo Corporation Is Owned as Follows