Lip Service, a calendar-year end, accrual basis C corporation, is in the business of selling makeup and providing beauty services. Claire Powder, the corporations founder, and her two sisters each own 250 of the 750 (total) shares of common (voting) stock. In addition, Ms. Powder owns all 750 shares of the corporations nonvoting preferred stock.

What are the consequences to the corporation and Ms. Powder if the corporation redeems all of Ms. Powders preferred stock for cash?

What are the consequences to the corporation and Ms. Powder if the corporation redeems all of Ms. Powders common and preferred stock for cash?