Question 12 As of January 1 of the current year, Flywheel, Inc. has E & P of $25

Question

Question 12

As of January 1 of the current year, Flywheel, Inc. has E & P of $25,000. Groucho owns all 320 shares of its common stock (basis: $45,000). On that date, Flywheel declares and distributes a nontaxable preferred stock dividend. Groucho receives 100 shares. Immediately after, the FMV of one share of common stock is $500 and the FMV of one share of preferred stock is $200. Three years later, Groucho sells the 100 shares of preferred stock to an unrelated individual for $24,000.

a. Assuming Groucho is in the 33% tax bracket, what are his income tax consequences resulting from the sale of the preferred stock? b. What is the effect on Flywheel’s E & P as a result of the sale of the preferred stock? c. Assume Groucho sells the preferred stock back to Flywheel at a time when its E &P is $15,000. What are his income tax consequences?

Explanation / Answer

You are trying to estimate the average amount a family spends on food during a year. In the past, the standard deviation of the amount a family has spent on food during a year has been approximately $1200. If you want to be 99% sure that you

have estimated average family food expenditures within $60, how many families do you need to survey?   

ANSWER:    

=1200, z-multiple = 2.575, B = 60 . The sample size for a mean is given by

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