Question 158.Sam’s gross estate includes stock in Tern Corporation and Wr

158.Sam’s gross estate includes stock in Tern Corporation and Wren Corporation, valued at $1.4 million and $980,000, respectively. At the time of Sam’s death, the stock represented 22% of Tern’s outstanding stock and 27% of Wren’s outstanding stock. Sam’s adjusted gross estate equals $6,500,000. Death taxes and funeral and administration expenses for Sam’s estate total $980,000. Sam had a basis of $350,000 in the Tern stock and $190,000 in the Wren stock at the time of his death. None of the beneficiaries of Sam’s estate own (directly or indirectly) any stock in Tern Corporation, but some of the beneficiaries own stock of Wren Corporation. Consider the following independent questions.

a. What are the tax consequences to the estate if all of its Wren stock is redeemed by Wren Corporation for $980,000?

b. What are the tax consequences to the estate if all of its Tern stock is redeemed by Tern Corporation for $1.4 million?

159.Raul’s gross estate includes 1,500 shares of stock of Orange Corporation (basis to Raul of $600,000, fair market value on date of death of $4.1 million). The estate will incur $2.2 million of death taxes and funeral and administration expenses, and the adjusted gross estate is $9 million. Denise, Raul’s daughter and sole heir of his estate, owns the remaining 500 shares of Orange Corporation’s (2,000) shares outstanding. In the current year, Orange (E & P of $5 million) redeems all of the estate’s 1,500 shares for $4.1 million. What are the tax consequences of the redemption to Raul’s estate?

160.Ivory Corporation (E & P of $1 million) has 2,000 shares of common stock outstanding owned by unrelated parties as follows: Veronica, 1,000 shares, and Tommie, 1,000 shares. Veronica and Tommie each paid $150 per share for the Ivory stock 12 years ago. In May of the current year, Ivory distributes land held as an investment (basis of $180,000, fair market value of $390,000) to Veronica in redemption of 350 of her shares.

a. What are the tax results to Veronica on the redemption of her Ivory stock?

b. What are the tax results to Ivory Corporation on the distribution of the land?

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