In the current year, Quail Corporation distributed installment notes payable in redemption of some of its shares. Quail incurred the following expenditures in connection with the redemption: accounting fees of $7,000 and legal fees of $8,000. In addition, Quail paid $10,000 of interest expense on the installment notes payable. The distribution was a qualifying stock redemption. How much of the $25,000 is deductible in the current year?
A) $0
B) $7,000
C) $10,000
D) $25,000
E) None of the above

Question

Quizplus · Accepted Answer

The $10,000 of interest expense on the installment notes payable is deductible in the current year. Accounting and legal fees related to the redemption of shares are not deductible as they are considered capital expenditures.

In the Current Year, Quail Corporation Distributed Installment Notes Payable