"Preferred Stock Bailouts and Personal Holding Company

  "Preferred Stock Bailouts and Personal Holding Company     From you analysis of Section 306 in the e-Activity, differentiate between the tax treatment of earnings and profit on the distributing corporation of both a sale of Section 306 stock and redemption of Section 306 stock- Suggest the most important reasons for this differentiation in tax treatment- Discuss the methods that corporations may use to circumvent the restrictions- Per the text, the personal holding company (PHC) tax penalizes taxpayers who enter into tax-motivated transactions designed to shelter passive income of closely held corporations from higher individual tax rates- Suppose you represent a professional athlete who is the majority owner of a corporation- The corporation has several personal service contracts with advertising agencies and endorsements for you client in addition to passive income- Propose a plan in which you mitigate the potential for the PHC tax on the client’s corporation-