George and Martha each own 50 percent of the 5000 total shar

George and Martha each own 50 percent of the 5,000 total shares of stock of Mt. Vernon Inc. Pursuant to the termination of a qualifying trade or business, Mt. Vernon distributes $10,000 each to George and Martha, the total distribution representing 25 percent of its assets. The distribution is pursuant to a plan of partial liquidation. For purposes of determining their individual income tax consequences of this transaction, how many share are George and Martha deemed to have surrendered? A. George and Martha are deemed to have surrendered 50 percent of their shares B. Since the transaction qualified as a partial liquidation termination transaction, no shares are deemed to have been surrendered in the absence of an actual surrendering of shares. C. George and Martha are deemed to have each redeemed 25 percent of their shares or 625 shares D. There is insufficient information provided to determine the number of shares that each is deemed to have surrendered.

Solution

C. George and Martha are deemed to have each redeemed 25 percent of their shares or 625 shares The holding for each Gerorge and Martha is 2500 shares each. As Mt Vernon Inc distributed 25% of the assets hence so they surrendered (2500*25%) 625 shares each If any doubt please comment