LO.8, 9 Broadbill Corporation (E & P of $650,000) has 1,000 shares of common stock outstanding. The shares are owned by the following individuals: Tammy, 300 shares; Yvette, 400 shares; and Jeremy, 300 shares. Each of the shareholders paid $50 per share for the Broadbill stock four years ago. In the current year, Broadbill Corporation distributes $75,000 to Tammy in redemption of 150 of her shares. Determine the tax consequences of the redemption to Tammy and to Broadbill under the following independent circumstances.

Question Continuation

Determine the tax consequences of the redemption to Tammy and to Broadbill under the following independent circumstances.

Tammy and Jeremy are grandmother and grandson.

See Explanation Below

Explanation:

Given.

Tammy number of shares = 300

Yvette number of shares = 400

Jeremy number of shares = 300

Each of the shareholders paid $50 per share.

Tammy's Ownership is calculated by; (300+300)/1000

= 600)1000

= 60% before redemption

Tammy's Ownership = (150 + 300)/850

Tammy's ownership = 450/850

Tammy's Ownership = 52.94% after redemption

The constructive ownership of Tammy is more than 80%, this means that the distribution is considered as income to Tammy

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answer; be sure that the information on file is correct;