1)Alvin Auster owned 100% of the common stock of Taxa Corporation. During 2014, when it earnings and profits were $3,500, Tara issued preferred stock worth $5,000 as a nontaxable stock dividend to Alvin. In 2015, when Tara's earning and profits were $5,000, Alvin sold the preferred stock to an unrelated person for $ 5,000. What amount of dividend income is recognized by Alvin on the sale of the preferred stock?

a) 0

b) $2,500

c) 3,500

d) 5,000

Pleae explain why....

2) Assume the same facts as in question (1) except Alvin has Tara corporation redeem his preferred stock for $5,000 in 2015. What amount of redemption procedees will be recognized by Alvin as dividend income?

a) 0

b)$2,500

c) 3,500

d) 5,000

Please explain why....

Please somebody can do it?? I asked before and nobody answer this morning. Thank you