Corporate Redemption

Little Corporation is a privately-held C corporation (Little Corporation stock is not sold on an exchange). The stock in Little Corporation is held by the following:

Helen 1000 shares

Hannah (Helen's sister) 1000 shares

Mila (Helen's daughter) 1000 shares

X Corp (Helen owns 60% of X corp stock) 1000 shares

P partnership (Helens has a 40% interest in the partnership) 1000 shares

This year, Helen redeems 500 shares of her Little Corporation stock and receives $50,000. Helen's basis in these 500 shares is $30,000. Helen's income from other sources puts her well into the 37% tax bracket.

Determine:

Will Little Corporation's redemption of Helen's stock be treated as a qualified stock redemption? Be sure to show numerical calculations to support your answer.

What is Helen's tax liability from receiving $50,000 for her Little Corporation stock? Show your work for partial credit.

Would your answer for Helen be different if Mila was her cousin AND if Helen owned 30% of the stock in X corporation? Explain how this relationship and reduced ownership in the corporation would (or would not) affect the tax treatment of the redemption.