a) In year 1, Pennzoil Co. acquires 25% of the outstanding stock of Chevron Inc. in a series of market purchases from the public. Chevron is engaged in the production of oil and gas world-wide, including on-shore and off-shore United States. In year 6, Chevron agrees to redeem its stock from Pennzoil in exchange for Chevron's U.S on-shore oil and gas properties. In the hope that the transaction will be non-taxable, Chevron transfers its U.S. oil and gas properties to Newco in exchange for Newco stock and thereafter distributes the Newco stock to Pennzoil in exchange for its Chevron stock. What are the tax consequences?

b) Same as (a) except assume that Pennzoil acquired newly-issued Chevron shares in year 1 pursuant to an agreement whereby Chevron granted Pennzoil an option to "put" the shares to Chevron at the end of year 4 in exchange for cash or all of Chevron's U.S. on-shore oil and gas properties. At the end of year 4 Pennzoil opted to acquire the production assets through a split-up by Chevron. What are the tax consequences?