Problem 7-55 (LO 7-4) (Algo)
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Bedrock Incorporated is owned equally by Barney and his wife Betty, each of whom holds 960 shares in the company.
Betty wants to reduce her ownership in the company, and it was decided that the company will redeem 480 of her shares
for $28,400 per share on December 31 of this year. Betty's tax basis in each share is $6,250. Bedrock has current E&P of
$10,100,000, and accumulated E&P was $50,310,000 at the beginning of the year.
Problem 7-55 Part a (Algo)
a. What are the amount and character (capital gain or dividend) recognized by Betty because of the stock redemption, assuming on.
the "substantially disproportionate with respect to the shareholder" test is applied?