Tanya is in the 32% tax bracket. She acquired 1,000 shares of stock in Swan Corporation seven years ago for $100 a share. In the current year, Swan Corporation (E & P of $1.2 million) redeems all of Tanya's shares for $160,000. What are the income tax consequences to Tanya if:

a. The redemption qualifies for sale or exchange treatment and Tanya has no other transactions in the current year involving capital assets?
b. The redemption does not qualify for sale or exchange treatment?

Question

Tanya is in the 32% tax bracket. She acquired 1,000 shares of stock in Swan Corporation seven years ago for $100 a share. In the current year, Swan Corporation (E & P of $1.2 million) redeems all of Tanya's shares for $160,000. What are the income tax consequences to Tanya if:

a. The redemption qualifies for sale or exchange treatment and Tanya has no other transactions in the current year involving capital assets?
b. The redemption does not qualify for sale or exchange treatment?

Quizplus · Accepted Answer

The Answer of Tanya is in the 32% tax bracket. She acquired 1,000 shares of stock in Swan Corporation seven years ago for $100 a share. In the current year, Swan Corporation (E & P of $1.2 million) redeems all of Tanya's shares for $160,000. What are the income tax consequences to Tanya if:

a. The redemption qualifies for sale or exchange treatment and Tanya has no other transactions in the current year involving capital assets?
b. The redemption does not qualify for sale or exchange treatment?

Tanya Is in the 32% Tax Bracket