Sam owns 30% of the stock of Gold,Inc.(adjusted basis of $300,000).Gold redeems 70% of Sam's shares for $500,000.If the stock redemption qualifies for return of capital treatment,Sam's recognized gain is $200,000.

Question

Quizplus · Accepted Answer

If the redemption qualifies for return of capital treatment, Sam's recognized gain would be $30,000 (the amount of the redemption payment that exceeds his adjusted basis of $90,000), not $200,000. The statement in the question about the recognized gain is incorrect.

Sam Owns 30% of the Stock of Gold,Inc