Result of the transaction

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Kingbird Corporation (Earnings And Profits (E&P) $160,000) has two hundred (200) shares of stock outstanding. Kingbird Corporation's stock is held by Amata (one hundred ten (110) shares of stock) and Esteban (ninety (90) shares of stock), who are unrelated individuals. Kingbird Corporation redeems forty (40) of Amata's shares of stock for $1,000 per share. Amata paid $100 per share for her Kingbird Corporation's stock five (5) years ago. As a result of this transaction, which of the following is correct?

(a) Amata has Dividend Income of $40,000.

(b) Amata has a Long-Term Capital Gain of $36,000.

(c) Kingbird Corporation reduces its Earnings And Profits (E&P) by $40,000.

(d) Amata's basis in her remaining seventy (70) shares of stock is $11,000.

Reference no: EM13121199

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