How many shares of redden corporation are owned by brad

Assignment Help Accounting Basics

Reference no: EM131298202

Exercise 1 - Redden Corporation has 1,000 shares of stock outstanding which are owned as follows:

Brad 200 shares

Rochelle 100 shares

Trust for Brad and Rochelle's Children 100 shares

ABC Partnership 300 shares

Ron (Rochelle's Father) 300 shares

Brad and Rochelle are married. The equal general partners of ABC Partnership are Brad, Rochelle, Ron and Beverly (Ron's girlfriend). Ron has no common law or legal relationship with Beverly. They're just having fun.

REQUIRED (Answer all of these questions):

1. How many shares of Redden Corporation are owned (directly and indirectly) by:

Brad ______________

Andrew (Brad and Rochelle's child) ____________

Beverly____________

Ron ____________

2. Using all the facts in problem #1 above, also assume that Redden Corporation redeems 99 shares from the Trust. The trust has a basis in its shares of $100,000, and the redemption amount is $250,000. Redden Corporation has current E&P of $400,000. Outline the various tests that could be used by Redden Corporation to determine whether the redemption qualifies for sale or exchange treatment. Does the redemption qualify for sale or exchange treatment? Which method would you advise the trust to use? What is the tax effect of the redemption on the Trust?

Exercise 2 - Andrew Corporation has the following items of income and expense for 2016 as reported on its financial statements:

Net sales $3,000,000

Operating Expenses $1,900,000

Operating Income $1,100,000

Dividend Income $1,300,000

Net Income $2,400,000

You are also provided with the following information:

1. The corporation has the following net operating losses from prior years:

2009 $40,000

2010 $70,000

2011 $20,000

2012 $275,000

2013 $120,000

2. Operating expenses include charitable contributions of $150,000 for the period. The corporation also had a charitable contribution carry forward of $400,000 from 2013 and $300,000 from 2014. Assume all the charitable contributions were cash contributions made to qualified charities.

3. Operating income includes fines and penalties of $10,000, advertising expense of $30,000, tax exempt interest income of $25,000 and meals and entertainment expenses of $50,000.

4. The dividend income was derived as follows. All companies are US based and the stock has been held for at least one year.

Corporation Name % Ownership Dividend Received

XYZ Corporation 81% $700,000

XYZ Corporation 43% $100,000

Kristin Corporation 12% $500,000

REQUIRED: Please answer the questions in the space provided:

Taxable Income Before Charitable Contributions, NOL & DRD __________________

Charitable Contributions __________________

Taxable Income Before NOL and DRD deductions __________________

Dividends Received Deduction __________________

Net Operating Losses from prior years used this year __________________

Taxable Income After All Deductions __________________

CARRYFORWARDS

Charitable Contribution Carryforward generated this year __________________

Charitable Contribution Carryforward from prior year (if any) __________________

NOL Carryforward from this year (if any) __________________

NOL Carryforwards from prior year(s) (list all, if any) __________________

Reference no: EM131298202

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