Question

Viking Corporation is owned equally by Sven and his wife, Olga, who each hold 100 shares. Viking redeemed 75 shares of Sven's stock on December 31, 20X3, for $2,000 per share with an adjusted tax basis of $1,000 per share.

a. The total redemption cost for Viking was $150,000.

b. Olga's shares remain unaffected by the redemption.

c. Sven's adjusted tax basis in each redeemed share is $2,000.

d. Viking redeemed 100 shares of Olga's stock.

Answer 1

b. Olga's shares remain unaffected by the redemption. The total redemption cost for Viking was $150,000. Olga's shares were unaffected by the redemption. Sven's adjusted tax basis for each redeemed share is $1,000. Viking did not redeem any shares of Olga's stock.

Step-by-step explanation:

Viking Corporation is owned equally by Sven and his wife, Olga, each holding 100 shares. On December 31, 20X3, Viking redeemed 75 shares of Sven's stock for $2,000 per share with an adjusted tax basis of $1,000 per share.

1. The total redemption cost for Viking was $150,000. This can be calculated by multiplying the number of shares redeemed (75) by the redemption price per share ($2,000).
2. Olga's shares remain unaffected by the redemption. Her 100 shares are still owned by her and not redeemed by Viking.
3. Sven's adjusted tax basis in each redeemed share is $1,000, not $2,000. The adjusted tax basis is the original cost basis plus any adjustments, such as depreciation or capital improvements.
4. Viking did not redeem any shares of Olga's stock. Only Sven's shares were redeemed.