Taylor owns 40% of the Cedar Company for which his basis is $400,000. He sells o

Question

Taylor owns 40% of the Cedar Company for which his basis is $400,000. He sells one-half of his ownership interest to Ashley for $350,000. Which of the following statements is correct?

a. If Cedar is an S corporation, Taylor has a recognized gain of $150,000, some of which may be capital and some of which may be ordinary income.

b. If Cedar is a C corporation, Taylor has a recognized capital gain of $150,000.

c. If Cedar is a partnership, Taylor has a recognized capital gain of $150,000.

d. Only b. and c. are correct.

e. a., b., and c. are correct.

Explanation / Answer

Taylor owns 40% of the Cedar Company for which his basis is $400,000. He sells one-half of his ownership interest to Ashley for $350,000.The answer is a

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