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What is the impact of the transaction on​ Rose?

/in /by

Rose has a​ $20,000 basis in the​ 60% of the

Parent Corporation stock that she owns. Parent Corporation owns a​ 70% interest in Child Corporation. Parent and Child have current and accumulated​ E&P balances of​ $25,000 and​ $40,000, respectively. In return for​ $15,000, Rose sells​ 10% of the Parent Corporation stock to Child Corporation. What is the impact of the transaction on​ Rose?

A.

Rose will be treated as having received a​ $15,000 dividend from Parent Corporation.

B.

Rose will be treated as having received a​ $15,000 dividend distribution from Child Corporation.

C.

Rose will recognize a​ $5,000 capital gain.

D.

Rose will be treated as having sold stock to Parent Corporation and recognize a​ $15,000 capital gain.

 
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