Boots Inc. is owned equally by Alfonso and his daughter Nancy, each of whom holds 1,000 shares in Boots. Alfonso wants to retire from the company, and
Boots Inc. is owned equally by Alfonso and his daughter Nancy, each of whom holds 1,000 shares in Boots. Alfonso wants to retire from the company, and it is decided that Boots will redeem all 1,000 of Alfonso’s shares for $25,000 per share on December 31 of this year. Alfonso’s tax basis in each share is $500. Boots Inc. has current E&P of $1,000,000 and accumulated E&P of $5,000,000.