Lou, the sole owner of Water Corporation (a C Corp) owns 1,000 shares, which he purchased in Year 1. Lous basis in Waters stock is $40,000. During Year 5, Water, which has earnings and profits of $80,000, redeems 900 of Lous shares for $60,000. What are the amount and the character of the income or gain Lou must report as a result of the redemption?

	A.	$24,000 of capital gain.
	B.	$60,000 of dividend income.
	C.	$60,000 of capital gain.
	D.	$24,000 of dividend.