1. Springfield, Inc. (Springfield) is a media company that produces animated sitcoms. Springfield has five shareholders: Marge, Homer, Ned, Moe, and Marge's grandmother. Marge and Homer are married, and Ned and Moe are unrelated to the other Each of the shareholders owns 20% of the 1,000 share s of Springfield 's outstanding common stock. The overall net value of the corporation is $5 million. The corporation decided to redeem Marge completely and distributed $1 million cash in return for all of her stock. The corporations current earnings and profits for the year of the redemption is $2.5 million. It has no accumulated e&p. Marges basis in her shares was $300,000. What tax consequence to Marge? To Springfield? To the remaining shareholders?

2.a. What if Springfield distributed property worth $1 million (with a basis to Springfield of $250,000) instead of cash to remove Marges stock?

b. What if Springfield redeemed only ten shares of Moes stock and no stock from Marge? Moes basis in the redeemed shares was $20,000.

c. . Would the results in 1 change if all five shareholders had agree to a buy out arrangement pursuant to which each agreed to first offer sale of the shares to the other shareholders before selling to a third party?

d. Would your answers to any of the above change if, in addition to their interests in Springfield Marge and Moe were partners in an unrelated partnership?