Corporation Z is owned entirely by 2 individuals, C and D. C owns 60 shares of Z common stock bought in one transaction for $1200. D owns 40 shares of X common stock with a basis of $60 per share. The stocks fair market value is $40 per share. Z's E&P is $1000. C sells 40 shares to Z for $1200.

a. The redemption will be given dividend treatment.

b. The redemption will be given sale treatment under 302 (b)(2), substantially disproportionate disposition

c. It is impossible to tell whether the transaction will be given sale or dividend treatment

d. None of the above

PLEASE EXPLAIN WHY YOU CHOOSE AN OPTION!!