Attribution from Lucas's LLC sinks a 150-share buyback under Section 302(b)(2); at 185 shares it passes, and AC507's Unit 5 redemption analysis prices both outcomes. Searches like "ac 507 unit 5 assignment example", "ac507 unit 5 sample" and "ac507 unit 5 example" land here.
What a finished AC507 Unit 5 redemption analysis looks like
Four parts under an ownership table. The table lists every holder before and after, with a column for stock attributed under Section 318(a)(2)(A): 60 percent of the LLC's 300 shares, or 180, counts as Lucas's. His interest runs from 53 percent before to 44.71 percent after a 150-share redemption. Part one applies the substantially disproportionate test; he clears the below-50 line but not the 80 percent ratio, which requires less than 42.4 percent. Part two solves for the threshold: any redemption above 184.03 shares passes, so 185 does, at 42.33 percent. Part three rejects the meaningful reduction test for the original proposal. Part four sets the consequences side by side, at [$1,500] a share and [$300] of basis per share: a $225,000 dividend with $45,000 of basis shifted, or $222,000 of capital gain on 185 shares.
How a AC507 Unit 5 example is structured
Constructive ownership is fixed before any test, because Section 302 measures every percentage through Section 318. The table therefore shows why the LLC's shares reach Lucas only in proportion to his 60 percent interest. The bright-line test is applied next, with both thresholds computed rather than asserted. The threshold solution is algebra, set out in two lines a grader can check: 530 minus x, over 1,000 minus x, must fall below 0.424. The judgment test follows. Lucas drops below a majority on paper, but as the LLC's managing member he still votes its 300 shares with his own 200, so the analysis finds no meaningful reduction, citing United States v. Davis for the standard. Consequences close each branch. A last paragraph warns that a planned later buyback of Megan's 350 shares would be tested with this one as a series.
Attribution from an entity
Section 318(a)(2)(A) assigns Lucas 180 of the LLC's shares, proportionate to his interest, and the family waiver in Section 302(c)(2) cannot remove entity attribution.
Two thresholds, one failed
At 44.71 percent after the proposed buyback, Lucas is under 50 percent but above 80 percent of his prior 53 percent, so Section 302(b)(2) fails.
Solving for the passing number
The inequality resolves at 184.03 shares, so a 185-share redemption leaves him at 42.33 percent and meets both lines of the test.
Control the paper cannot ignore
Voting the LLC's block alongside his own gives Lucas 500 of 850 votes, which defeats any argument under Section 302(b)(1) that his interest meaningfully shrank.
Dividend or exchange, priced
In the failed version, $225,000 is a dividend to the extent of [$900,000] of earnings and profits; in the passing version, 185 shares yield $222,000 of long-term gain.
Where marks go in AC507 Unit 5
Grades on the redemption analysis turn first on whether attribution is applied, and applied correctly. Measuring Lucas at his direct 35 percent makes the 150-share proposal pass with ease, the kind of confident wrong answer the facts were built to catch. Attributing all 300 LLC shares, rather than 60 percent of them, errs the other way and moves the threshold. Graders often find the 80 percent ratio computed against the wrong denominator, the pre-redemption share count, which also moves the passing number. Invoking the family waiver for entity-held stock misreads Section 302(c)(2). On the consequences side, a dividend outcome that lets the redeemed shares' basis vanish, rather than shift to Lucas's remaining stock, is marked down, and so is an exchange branch that claims the saving comes from a lower rate when the real difference is basis recovery.
Get a AC507 Unit 5 example written to your instructions
Include the Unit 5 share register, any entity or family relationships among holders, the price and basis per share and the earnings figure, together with your rubric. Attribution is mapped first, each Section 302 route is tested to its consequence, and the analysis arrives in 24-48h. A first custom sample costs nothing.
AC507 Unit 5 questions, answered
If dividends and capital gain share a rate, why does sale treatment matter?
Basis. Under exchange treatment Lucas subtracts the redeemed shares' basis and reports only the gain; under dividend treatment the entire payment is income and the basis merely migrates to his other shares. Capital gain can also absorb capital losses, which a dividend cannot. The example shows both effects and brackets the rates, since qualified dividend and long-term gain rates depend on the year and his income.
Why can't Lucas waive the attribution from his LLC?
The waiver in Section 302(c)(2) reaches only family attribution under Section 318(a)(1), and only when the redemption completely terminates the shareholder's interest. Entity attribution under Section 318(a)(2) has no individual waiver. Lucas could change the result only by changing the facts, for instance by reducing his LLC interest first, and the example notes that such a step would draw scrutiny if taken solely for tax.
What would a later buyback of Megan's shares do?
If it is part of the same plan, Section 302(b)(2)(D) tests the redemptions together. Removing Megan's 350 shares would shrink the outstanding count and push Lucas's constructive percentage back above both lines, turning a passing redemption into a failing one. The example flags this in its last paragraph, because prompts in this unit sometimes add a second redemption later in the facts.