In 1980 John formed a farm business (corporation) by contributing a piece of farmland with an adjusted basis of $95,000

In exchange, he got 100 shares of stock, and was the only stockholder. Transaction pursuant to Section 1244.

At the time of the transaction the farm was worth $140,000.

In 1990 - John gifted 20 shares apiece to his two sons - Carl and Chris. These gifts at the time were valued at $27,000 each. John did not pay a gift tax on the shares. He wanted to reward his sons for their hard work as managers of the company and wanted to place some of the taxes of the business on them.

Carl got bought out in exchange for a smaller field on the farm but was no longer involved in the family business.

The field given to Carl was originally purchased for $10,000, and the present value is $12,000. Carl's shares were worth $12,000 at the time of the transfer. During the year of the transfer, the family farm earned $80,000.

Questions: Perform the calculations if the transfer for Carl is treated as a redemption and then calculate if the transfer is treated as a dividend.

What is the final calculation of consequences to Carl?