Milan Corporation is owned by four shareholders. J.S. Backer owns 100% of Lakeside Corporation stock, having a $ 475 comma 000 basis. On December 31 of the current year, Lakeside Corporation reported the following balance sheet: View the balance sheet.LOADING... Sanofi Corporation wishes to purchase, for cash, 80% of Lakeside stock from Mr. Backer and then make a Sec. 338 election.Andy and Bob each own 40% of the outstanding common and preferred stock. Chris and Doug each own 10% of the outstanding common and preferred stock. The shareholders want to retire the preferred stock that was issued five years ago when the corporation was in the midst of a major expansion. Retirement of the preferred stock will eliminate the need to pay annual preferred dividends. Explain the tax consequences of Alternative 1 to the shareholders. Alternative 1 Milan redeems the $100 par preferred stock for its $120 call price. Each shareholder purchased his preferred stock at its par value five years ago