5. Bobcat Corporation redeems all of Zeds 4,000 shares and distributes to him 2,000 shares of Van Corporation stock plus $60,000 cash. Zeds basis in his 20% interest in Bobcat is $100,000 and the stocks 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.