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    Property Income tax: Corporations & Partnerships

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    27. 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 $400,000 and a fair market value of $550,000 on the date of the transfer. In the current year, Blue Corporation (E & P of $1 million) redeems 100 shares from Eleanor for $290,000 in a transaction that does not qualify for sale or exchange treatment. With respect to the redemption, Eleanor will have a:
    a. $250,000 dividend.
    b. $290,000 dividend.
    c. $250,000 capital gain.
    d. $290,000 capital gain.
    e. None of the above.

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    Solution Summary

    Property income tax for corporations and partnerships are examined.