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linda_us
linda_us, Master's Degree
Category: Multiple Problems
Satisfied Customers: 1402
Experience:  A tutor for Business, Finance, Accounts and other related topics.
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These are the problems of entity tax class. I got stuck

Customer Question

Hi , these are the problems of entity tax class. I got stuck with this problem. Could you help me?
Howard Stark, envious of his son’s movie career, ventured into television, but only got a small part in a story about his inventions. So, he decided to finance his own reality show, Iron Baker. (Whether he stole the concept from Tony or it described the consistency of his bread, we are not sure).
In a recent episode he was demonstrating the proper technique to raise shortbread, but got cara-wayed and took too long. Everything went a-rye, the loaf exploded (it was filed with baking powder) and Howard was toast.
You have been asked to advise his estate on the following.
Howard’s gross estate includes:
1. 1,000 shares of Stark Armaments, Inc. This is Howard’s military development company. His basis in the shares is $ 350,000. The date of death value is $1,500,000 (we took out some zeros so as to not overtax your calculators). It was a great deal of E & P—more than enough no matter what we do. The balance of the stock is owned as follows:
a. Maria Stark, his wife, owns 400 shares.
b. Pepper Potts (Tony’s wife—ok I’m a couple of movies early) owns 90
c. Peggy Carter, no relation, owns the remaining 510.
2. 610 shares of Stark Innovations, Inc. This is Howard’s commercial company. His basis in the stock was $190,000. It’s FMV at the time of his death was $1,100,000. It too had overwhelming E & P. The balance of the stock is owned as follows:
a. Tony Stark, his son, owns 100 shares.
b. Maria owns 90 shares.
c. Pepper Potts owns 100.
d. Edwin Jarvis, the butler but otherwise no relation, owns 100.
Taxes and administration expenses are $980,000. The total estate is $6,500,000. Maria and Tony are the sole heirs of the estate.
Maria, the executor, asks you:
1 What are the tax consequences to the estate if it redeems stock to pay off the taxes and expenses? Does it matter which stock is redeemed?
2 What are the tax consequences to the estate if all of its Armaments stock is redeemed by the corporation for FMV?
3 What are the tax consequences to the estate if all of its Innovation stock is redeemed by the corporation for FMV?
No stock of the other shareholders will be redeemed.
Submitted: 1 year ago.
Category: Multiple Problems
Expert:  Mr. Gregory White replied 1 year ago.
Hello, my name is ***** ***** this might be time sensitive.Do you still need this answered?
Customer: replied 1 year ago.
yes, I still need this answered by next Wednesday? Is it possible?
Expert:  Mr. Gregory White replied 1 year ago.
After going through my resources, I do not have what is necessary to complete at this time.I am opting out and opening up to the other professionals and messaging a couple who might be able to help. Someone should be with you shortly.
Customer: replied 1 year ago.
Can it be answered by Tuesday? Is someone working on it? Thank you.
Customer: replied 1 year ago.
Maria, the executor, asks you:
This is our progress for now
1 What are the tax consequences to the estate if it redeems stock to pay off the taxes and expenses? Does it matter which stock is redeemed? (49/50)
• Redemptions• **Redemption to pay estate tax
• Basis of stock is stepped up to FMV on date of death→ redemption price = stepped-up basis, no tax consequences to estate
• Redemption amount > death taxes and funeral ad exp does not quality as a stock redemption → after redemption to pay taxes, estate’s remaining share of company would be distributed to the children
• At the date of death does the estate have a gain or loss on the stock redemptions???2 What are the tax consequences to the estate if all of its Armaments stock is redeemed by the corporation for FMV?
• At the date of death does the estate have a gain or loss on the stock redemptions???3 What are the tax consequences to the estate if all of its Innovation stock is redeemed by the corporation for FMV?
• At the date of death does the estate have a gain or loss on the stock redemptions???No stock of the other shareholders will be redeemed.
Customer: replied 1 year ago.
I am posting the original question again.Howard Stark, envious of his son’s movie career, ventured into television, but only got a small part in a story about his inventions. So, he decided to finance his own reality show, Iron Baker. (Whether he stole the concept from Tony or it described the consistency of his bread, we are not sure).In a recent episode he was demonstrating the proper technique to raise shortbread, but got cara-wayed and took too long. Everything went a-rye, the loaf exploded (it was filed with baking powder) and Howard was toast. (Howard Stark DIED)You have been asked to advise his estate on the following.Howard’s gross estate includes:
1. 1,000 shares of Stark Armaments, Inc. This is Howard’s military development company. His basis in the shares is $ 350,000. The date of death value is $1,500,000 (we took out some zeros so as to not overtax your calculators). It was a great deal of E & P—more than enough no matter what we do. The balance of the stock is owned as follows:
a. Maria Stark, his wife, owns 400 shares.
b. Pepper Potts (Tony’s wife—ok I’m a couple of movies early) owns 90
c. Peggy Carter, no relation, owns the remaining 510.2. 610 shares of Stark Innovations, Inc. This is Howard’s commercial company. His basis in the stock was $190,000. It’s FMV at the time of his death was $1,100,000. It too had overwhelming E & P. The balance of the stock is owned as follows:
a. Tony Stark, his son, owns 100 shares.
b. Maria owns 90 shares.
c. Pepper Potts owns 100.
d. Edwin Jarvis, the butler but otherwise no relation, owns 100.
Taxes and administration expenses are $980,000. The total estate is $6,500,000.Maria and Tony are the sole heirs of the estate.
Maria, the executor, asks you:
Customer: replied 1 year ago.
Stark Armaments Inc- military development company
1000shares
FMV basis=$350,000
death value= $1,500,000Maria-wife 400shares = 40%
pepper-son's wife =9%
peggy-3rd party=51%Stark Innovations-commercial
610 shares
basis=$190,000
FMV=$1,100,000
Tony-son=16.39%
Maria-wife=14.754%
Pepper=16.393%
Jarvis= 16.39%Taxes and expense=$980,000
total estate=$6,500,000
Customer: replied 1 year ago.
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