3. Seven years ago, Eleanor transferred property she had used in her sole proprietorship to Blue Corporation for 4,000 shares of Blue Corporation in a transaction that qualified under 351. The assets had a tax basis to her of $400,000 and a fair market value of $700,000 on the date of the transfer. In the current year, Blue Corporation (E & P of $1 million) redeems 700 shares from Eleanor for $360,000 in a transaction that qualifies for sale or exchange treatment. With respect to the redemption, Eleanor will have a: a. $140,000 dividend. b. $260,000 dividend. c. $140,000 capital gain. d. $290,000 capital gain. e. None of the above. 4. Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the current year. In addition, Elk has a $22,000 long-term capital gain and a $15,000 short-term capital loss. Elk's taxable income is: a. $87,000. b. $83,000. c. $80,000 d. $90,000 e. None of the above. 5. Bobcat Corporation redeems all of Zed's 4,000 shares and distributes to him 2,000 shares of Van Corporation stock plus $60,000 cash. Zed's basis in his 20% interest in Bobcat is $100,000 and the stock's value is $250,000. At the time Bobcat is acquired by Van, the accumulated earnings and profits of Bobcat are $200,000 and of Van are $75,000. How does Zed treat this transaction for tax purposes? a. No gain is recognized by Zed in this reorganization. b. Zed reports a $50,000 recognized dividend. c. Zed reports a $40,000 recognized dividend and a capital gain of $40,000. d. Zed reports a $40,000 recognized dividend and a $10,000 capital gain. e. Not enough information is available to determine proper treatment