Sole proprietorship to blue corporation

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Five years ago, Eleanor transferred property she had used in her sole proprietorship to Blue Corporation for 1,000 shares of Blue Corporation in a transaction that qualified under § 351. The assets had a tax basis to her of $300,000 and a fair market value of $450,000 on the date of the transfer. In the current year, Blue Corporation (E & P of $600,000) redeems 200 shares from Eleanor for $190,000 in a transaction that qualifies for sale or exchange treatment. With respect to redemption, Eleanor will have a:

a. $130,000 dividend

b. $190,000 dividend

c. $130,000 capital gain

d. $190,000 capital gain

e. None of the above

Reference no: EM13158078

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