For the last eleven years, Lime Corporation has owned and operated four different trades or businesses. Lime also owns stock in several corporations that it purchased for investment purposes. The stock in Lime Corporation is held equally by Sultan, an individual, and by Turquoise Corporation. Both Sultan and Turquoise own 1,000 shares in Lime that were purchased nine years ago at a cost of $200 per share. Determine whether the following independent transactions qualify as partial liquidations under 302(b)(4). In each transaction, determine the tax con- sequences to Lime Corporation, to Turquoise Corporation, and to Sultan.

a. Lime Corporation sells one of its trades or businesses (basis of $500,000, fair market value of $700,000) and distributes the proceeds equally to Sultan and Turquoise Corporation in redemption of 250 shares from each shareholder. Lime Corporation has E & P of $2.1 million as of the date of the distribution.

b. Lime Corporation distributes the stock (basis of $425,000, fair market value of $700,000) it holds in other corporations to Sultan and Turquoise Corporation equally in redemption of 250 shares from each shareholder. Lime Corporation has E & P of $2.1 million as of the date of the distribution.