During the current year, Gnatcatcher, Inc., (E & P of $1 million) distributed $200,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 33% tax bracket, and each had a $45,000 basis in her reedemed stock.

a. Assume the distribution to Brandi is a qualifying stock redemption. Determine Brandi's tax liability on the distribution.

b. Assume the distribution to Yuen is a nonqualified stock redemption. Determine Yuen's tax liability on the distribution.

a. Brandi's tax liability on the distribution is $23,250

b. Yuen's tax liability on the distribution is $30,000

Explanation:

Given

Amount = $200,000

Tax bracket = 33%

Redeem Stock = $45,000 basis

a.

First, we calculate the taxable dividend.

Taxable dividend is calculated by subtracting the redeemed stock from the total amount.

Taxable dividend = Amount - Redeemed Stock

Taxable dividend = $200,000 - $45,000

Taxable dividend = $155,000

Brandi's tax liability on the distribution is calculated as: Taxable dividend * tax rate

Tax liability = $155,000 * 15%

Tax liability = $23,250

Hence, Brandi's tax liability on the distribution is $23,250

b. With an assumption that the distribution to Yuen is a nonqualified stock redemption.

Yuen's tax liability on the distribution is calculated as follows;

Tax liability = Amount * Tax rate

Tax liability = $200,000 * 15%

Tax liability = $30,000

Hence, Yuen's tax liability on the distribution is $30,000

because she sucked. : )

(but so does trump, don't @ me)

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough