On 8/24/x5, Hunter and 6 individuals organized M Corporation. Each received the following shares of M Corp. voting stock: Hunter's father 2,000 Hunter's mother 2,000 Hunter 3,000 Hunter's sister 9,000 Hunter's grandfather 10,000 Hunter's friend, Bill 13,000 Hunter's wife 1,000 During the current tax year, M Corp. redeemed 2,000 of Hunter's shares for $30,000, 1,500 of his father's shares, 1,500 of his mother's shares, 3,000 of his sister's shares, and 12,000 of Bill's shares. Hunter had a basis in the redeemed M Corp. stock of $4,000.

1) Before the redemption, Hunter owns the following percentage of M Corporation:

None of these.

20

17.5

56

2) The redemption by Hunter will qualify as a sale or exchange for tax purposes per Code 302(b)(2) if Hunter owns less than the following percentage of M Corporation after the redemption:

50

44.8

None of these.

16

3) Hunter will treat the $30,000 distribution from M Corporation as follows:

$30,000 dividend

$30,000 distribution subject to Code 301

None of these.

$26,000 capital gain