Bob owns 100 shares of Dylan Company. Dylan Company's other 400 outstanding shares are owned by unrelated parties. Bob bought the shares on December 14, 2010 for $20,000 ($200 per share). On August 10, 2020, Dylan Company redeemed 60 shares from Bob. Bob received $50,000 for the shares. Dylan Company's paid-in-capital balance was $120,000 and its E8P was $400,000 in 2020.

What is the effect of the transaction on Bob and Dylan Company if the redemption is treated as a dividend?

What is the effect of the transaction on Bob and Dylan Company if the redemption qualifies for redemption status?