Question

During the current year, Webster Corporation repurchased 2,000 shares of its $1 par common stock in the open market for $5,000. Webster later resold 1,000 of these treasury shares to new shareholders when the stock was selling for $4 per share. Webster will report a gain (loss) on its current-year tax return of?

Answer 1

Answer:

Webster would not receive any gain.

Explanation:

The US internal revenue code Under Sec. 1032(a) states that no gain or loss shall be recognized to a corporation on the receipt of money or other property in exchange for stock (including treasury stock) of such corporation. No gain or loss shall be recognized by a corporation with respect to any lapse or acquisition of an option, or with respect to a securities futures contract to buy or sell its stock (including treasury stock).

Therefore, Webster would not receive any gain

Answer 2

Answer:

No gain is recorded

Explanation:

Base on the scenario been described in the question, Webster will record no gain or zero No gain. Under Sec. 1032(a), a corporation can recognizes no gain or loss on the receipt of money or other property in exchange for its own stock, which includes treasury stock. Therefore, for this reason Webster should not report any form of gain.