Corporation Z is owned entirely by two individuals, C and D. C owns 60 shares of Z common stock bought in one transaction for $1,200. D owns 40 shares of Z common stock with a basis of $60 per share. The stock's fair market value is $40 per share. Z's E&P is $1,000. C sells 20 shares to Z for $800.

a The redemption will be given dividend treatment

b The redempiton will be given sale or exchange 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 The redemption will most likely be treated as a sale under 302(b)(1), not essentially equivalent to a dividend, since the voting percentage has dropped to 50% in a two-person corporation and this is usualy sufficient to meet the test

e None of the above

Which answer is the correct?