At the time of his death on March 2, 2021, Horatio owned 60 percent of Lincoln Corporation, a
closely held corporation. His two children, who were the sole beneficiaries of his will, owned the
remaining 40 percent of Lincoln Corporation. Lincoln Corporation had $8 , 700 , 000 of
accumulated earnings and profits as of 1/1/2021 and $300 , 000 of current earnings and profits
for the year ending 12/31/2021 . Horatio's interest in Lincoln was valued at $7 , 000 , 000 and his
basis in his shares was equal to $1 , 750 , 000 . Funeral and administration expenses totaled $600
, 000 . Other unpaid obligations were equal to $3 , 000 , 000 . The balance of Horatio's estate
consisted of real property and publicly traded stock valued at $16 , 000 , 000 . These assets and
the Lincoln stock comprised the totality of Horatio's gross estate. Federal and state estat and
inheritance taxes imposed on Horatio's estate were Equal to $4 , 400 , 000 . a) If the corporation
redeemed $5 , 000 , 000 of Lincoln stock, how would the redemption be characterized for federal
income tax purposes? What would be the dividend income, if any, and/or the capital gain or loss
as a result of the redemption of the $5 , 000 , 000 of Lincoln Corporation stock? b) If the
corporation redeemed all $7 , 000 , 000 of Lincoln stock, how would the redemption be
characterized for federal income tax purposes? What would be the dividend income, if any,
and/or the capital gain or loss as a result of the redemption of the $7 , 000 , 000 of Lincoln
Corporation stock?.
At the time of his death on March 2- 2021- Horatio owned 60 percent of.pdf
1. At the time of his death on March 2, 2021, Horatio owned 60 percent of Lincoln Corporation, a
closely held corporation. His two children, who were the sole beneficiaries of his will, owned the
remaining 40 percent of Lincoln Corporation. Lincoln Corporation had $8 , 700 , 000 of
accumulated earnings and profits as of 1/1/2021 and $300 , 000 of current earnings and profits
for the year ending 12/31/2021 . Horatio's interest in Lincoln was valued at $7 , 000 , 000 and his
basis in his shares was equal to $1 , 750 , 000 . Funeral and administration expenses totaled $600
, 000 . Other unpaid obligations were equal to $3 , 000 , 000 . The balance of Horatio's estate
consisted of real property and publicly traded stock valued at $16 , 000 , 000 . These assets and
the Lincoln stock comprised the totality of Horatio's gross estate. Federal and state estat and
inheritance taxes imposed on Horatio's estate were Equal to $4 , 400 , 000 . a) If the corporation
redeemed $5 , 000 , 000 of Lincoln stock, how would the redemption be characterized for federal
income tax purposes? What would be the dividend income, if any, and/or the capital gain or loss
as a result of the redemption of the $5 , 000 , 000 of Lincoln Corporation stock? b) If the
corporation redeemed all $7 , 000 , 000 of Lincoln stock, how would the redemption be
characterized for federal income tax purposes? What would be the dividend income, if any,
and/or the capital gain or loss as a result of the redemption of the $7 , 000 , 000 of Lincoln
Corporation stock?
