Christopher Smith owns all 100 outstanding shares of X Corp. with a total tax basis of $6,000 (i.e., $60 per share).

Smith also owns 40% of the outstanding shares of Y Corp.

The remaining Y Corp. shares is owned by unrelated parties.

Smith sells 60 shares of his X Corp. shares to Y Corp. for $18,000 (i.e., $300 per share). Prior to the sale

(i) X Corp. had accumulated earnings and profits of $8,000 and

(ii) Y Corp. had accumulated earnings and profits of $2,000 and current earnings and profits of $1,000.

What are the U.S. tax consequences to Smith and Y Corp.?