Tax Planning

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Miscellaneous

 

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Joe A

 

Date added:

June 25, 2014

 

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A

 

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3 / 752

 

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The corporate business has been extremely successful; at the beginning of the year, Brovo’s balance sheet reflected over $2 million retained earnings. According to a recent appraisal, its stock is worth $2.5 million. The Boyers want to withdraw $500,000 in exchange for 200 shares of their stock. The Boyers believe that they will recognize a $180,000 gain on this redemption, which will qualify as capital gain...
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The Boyers believe that they will recognize a $180,000 gain on this redemption, which will qualify as capital gain. The question is: are the Boyers correct in their analysis of the tax consequences of the redemption? As a tax planner I’m going to assume that the Boyer’s are indeed paying appropriate dividends and that the computation of tax consequence on the above transaction does not fall into the category of a corporation that would be subject to a constructive dividend in this situation...
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