Lesson 6B-In Class Exercise 

Alan, Barbara and Dave are unrelated.  Each has owned 100 shares of Time Corporation stock for 5 years, and each has a $60,000 basis in those 100 shares.  Time’s E&P is $240,000.  Time redeems all 100 of Alan’s shares for $100,000, their FMV.  

a.	What is the amount and character of Alan’s recognized gain or loss?  What basis do Barbara and Dave have in their remaining shares?  What effect does the redemption have on Time’s e&p?  

b.	Same facts as a, except that Alan is Barbara’s son.

c.	Same facts as b., except that Alan signs an agreement under Sec. 302 (c)(2)(A) to waive family attribution rules.