Alpha Corporation operates a book publishing business ("Books") and a bar exam review course ("Cram") as divisions (i.e., not as separately incorporated entities). Alpha's single class of common stock outstanding is owned in equal shares by Michael, Pamela (Michael's wife) and Iris Corporation. neither Michael nor Pamela owns any stock in Iris. Alpha also owns all of the stock of Beta Corporation, a separately incorporated company which is engaged in the beta processing business, and it directly owns a diversified securities portfolio. What are the shareholder level tax consequences of the following alternative transactions: (a) Alpha has operated Books and Cram for more than five years and it distributes the assets of Books to its three equal shareholders in redemption of 50 shares from each shareholder. Any different result if the redemption is made without an actual surrender of shares?

Please answer part (b), and please reference any code sections applicable to the response.

(b) Is there a different result in (a) above, if Alpha had purchased Books three years ago for cash? If so, why should that matter? What if Alpha acquired Books three years ago in a tax-free organization?