Question 1. Which of the following is an incorrectstatement regarding the ap

1. Which of the following is an incorrectstatement regarding the application of the § 318 stock attribution rules?

a. An individual is not deemed to own the shares owned by his or her siblings.

b. Stock owned by an estate is deemed to be owned in full by a beneficiary.

c. Stock owned by any shareholder owning 50% or more of a corporation’s stock is deemed to be owned in full by the corporation.

d. Stock owned by a partnership is deemed to be owned proportionately by a partner.

e. None of the above.

2. Bristlebird Corporation (E & P of $700,000) has 3,000 shares of common stock outstanding. Juan owns 1,500 shares and his wife, Roberta, owns 1,500 shares. Juan and Roberta each have a basis of $90,000 in their Bristlebird stock. In the current year, Bristlebird Corporation redeems 1,000 shares from Juan for $250,000. With respect to the distribution in redemption of the Bristlebird stock:

a. Juan has dividend income of $250,000.

b. Juan has dividend income of $190,000.

c. Juan has a capital gain of $250,000.

d. Juan has a capital gain of $190,000.

e. None of the above.

3. Hazel, Emily, and Frank, unrelated individuals, own all of the stock in Wren Corporation (E & P of $1.2 million) as follows: Hazel, 1,500 shares; Emily, 300 shares; and Frank, 200 shares. Wren redeems 900 of Hazel’s shares (basis of $210,000) for $625,000. With respect to the distribution in redemption of the stock:

a. Hazel has a capital gain of $415,000.

b. Hazel has a capital gain of $625,000.

c. Hazel has dividend income of $415,000.

d. Hazel has dividend income of $625,000.

e. None of the above.

4. Hannah, Greta, and Winston own the stock in Redpoll Corporation (E & P of $900,000) as follows: Hannah, 600 shares; Greta, 400 shares; and Winston, 1,000 shares. Greta is Hannah’s daughter, and Winston is Hannah’s brother. Redpoll Corporation redeems 400 of Hannah’s shares (basis of $55,000) for $240,000. Hannah purchased the stock three years ago as an investment. With respect to the stock redemption, Hannah has:

a. Long-term capital gain of $185,000.

b. Long-term capital gain of $240,000.

c. Dividend income of $185,000.

d. Dividend income of $240,000.

e. None of the above.

5. Lucinda owns 1,100 shares of Blackbird Corporation stock at a time when Blackbird has 2,000 shares of stock outstanding. The remaining shareholders are unrelated to Lucinda. What is the minimum number of shares Blackbird must redeem from Lucinda so that the transaction will qualify as a disproportionate redemption?

a. 220.

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