Arcadia Corp is owned by (unrelated) shareholders as follows: Ashley (38%); Brian (16%); Charlie (16%); Daniela (15%); and Ernie (15%). Ashley is not very involved in overseeing the corporation and often neglects to attend board meetings. Although she's only 35, she declared herself "retired" and focuses exclusively on her painting. The corporation decides to redeem some of Ashley's shares in exchange for $100, 000. After the redemption, the ownership is as follows: Ashley (31%); Brian (17.5%); Charlie (17.5%); Daniela (17%); and Ernie (17%). How should the redemption be taxed to Ashley? Does I.R.C. section 302(b)(2) apply? Does I.R.C. section 302(b)(1) apply? Please be sure to consider the effect of I.R.C. section 318. Please consider whether Rev. Rul. 76-364 (attached) applies to this transaction. If not, describe how these facts differ from Rev. Rul. 76-364. Please explain your reasoning. Arcadia Corp is owned by (unrelated) shareholders as follows: Ashley (38%); Brian (16%); Charlie (16%); Daniela (15%); and Ernie (15%). Ashley is not very involved in overseeing the corporation and often neglects to attend board meetings. Although she's only 35, she declared herself "retired" and focuses exclusively on her painting. The corporation decides to redeem some of Ashley's shares in exchange for $100, 000. After the redemption, the ownership is as follows: Ashley (31%); Brian (17.5%); Charlie (17.5%); Daniela (17%); and Ernie (17%). How should the redemption be taxed to Ashley? Does I.R.C. section 302(b)(2) apply? Does I.R.C. section 302(b)(1) apply? Please be sure to consider the effect of I.R.C. section 318. Please consider whether Rev. Rul. 76-364 (attached) applies to this transaction. If not, describe how these facts differ from Rev. Rul. 76-364. Please explain your reasoning