Question

Since 2006, ben has owned all 100 outstanding shares of n and m corporation's stock. ben's basis for the stock is $50,000. in 2017, n and m have earnings and profits of $100,000. the corporation redeemed 25 shares of ben's stock for $75,000 in 2017. how will ben report this?

Answer 1

Ben will report $75,000 income in 2017.

Step-by-step explanation:

Since Ben is a sole shareholder; still 100% owner after redemption of the stocks by N and M corporation.

The redemption of $75,000 he received will be $75,000 dividend.

Ben will report $75,000 as the entire amount is taxable as dividend.