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$5)$ An investor takes a $10\%$ stake in a large publicly traded corporation and then succeeds in pressuring the board of the company to make various internal changes that should improve the value of the firm.

Later, the investor decides he wants to sell his stock, but he cannot find anyone to buy it as a block. To keep the stock from being sold on the open market and depressing the price, the company agrees to repurchase the investor$$s entire block of stock at a price exceeding his basis.

What is the proper tax treatment of this share redemption, from the point of view of the investor?

$6)$ Sarah Smiles sells her $40\%$ interest in Smiles Inc., an S corporation, to Frankie Frownie on January $31.$

Smiles Inc. earned $$420,000$ from January $1$ to January $31$ and a total of $$2,890,000$ from January $1$ through December $31(366$ days$).$

Using the daily allocation method, how much income should Sarah Smiles report?

$7)$ Walstein$$s$,$ an S corporation, reports the following results for the current year:

Ordinary income $$45,000$

Long$-$term capital gain $$10,000$

Municipal bond interest income $$5,000$

Walstein$$s makes a $$250,000$ cash distribution to its sole shareholder during the year. The shareholder's basis for Walstein$$s stock on January $1$ was $$110,000.$

How much of the distribution will be taxable?

$8)$ An individual owns $25\%$ of the stock of an S corporation. At the beginning of the year, the basis for that share of the stock is $$100,000.$

During the year, the corporation has ordinary income of $$150,000,$ bond income of $$30,000,$ long$-$term capital gains of $$25,000,$ and a short$-$term capital loss of $$15,000.$

The corporation$$s tax year is the same as the calendar year.

What is the individual$$s basis at the end of the year?

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