3. Chao, Louis, and Mari, unrelated individuals, own all of the shares of Cerise Corporation. All three shareholders have been active in the management of Cerise since its inception. In the current year, Chao wants to retire and sell all of her shares in the corporation. What issues should be considered in determining whether Chao should sell her stock to one of the other shareholders, to Cerise Corporation, or to a third party?

4. During the current year, Gnatcatcher, Inc., distributed $200,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 33% tax bracket, and each had a $45,000 basis in her redeemed stock. Brandi incurred $23,250 of tax on her redemption but Yuen incurred $30,000 on her redemption. Discuss the likely reason for the difference in tax liabilities arising from the stock redemptions.

5. Corporate shareholders typically prefer dividend treatment on a stock redemption. Why?

7. A shareholder's basis in property received in a stock redemption is the same whether the redemption is qualifying or nonqualified. Comment on the validity of this statement.

8. Would qualifying stock redemption treatment be ensured if the distribution was treated as a sale or exchange of the stock under applicable state law? Explain.

10. Do the stock attribution rules apply to all stock redemptions? Explain.

11. Briefly discuss the requirements for a redemption to qualify as a not essentially equivalent redemption.

12.If a redemption Is treated as a dividend ("nonqualified stock redemption"), what happens to the basis of the stock redeemed?

14. Tammy and Barry formed Pheasant Corporation several years ago in transaction that qualified under SS 351. Both shareholders serve as officers and on the board of directors of Pheasant n the current year, Pheasant Corporation redeemed all of Barry's shares in the corporation with a property distribution. What are the tax issues for Barry and pheasant?

15. Lauren owns 600 shares in Viridian Corporation. The remaining 400 shares of Viridian are owned by Lauren's son, Brett. Currently, Lauren is both president and chair of the board of directors of Viridian Corporation. If Viridian redeems Lauren's 600 shares, can the redemption qualify for sale or exchange treatment? Explain.