On January 5, 2016, Prowess Corp merges with Lux Corp under state law. In exchange for all of Lux Corp.'s assets and intellectual property, Prowess pays consideration of $600,000 worth of Prowess voting common stock. Prowess has no plans to continue the luxury ice cream business and plans to let the assets stay idle until it has a chance to sell them off in a couple of years. (Prowess suspects that the assets will increase exponentially in value due to global warming). After receiving the Prowess stock, Lux Corp. liquidates and distributes the Prowess stock pro rata to its shareholders. 1. How is the February 1" distribution taxed to Heath, Jetta, and Ashley? Please use the table below. February 1 Distribution Percent Dividend Ownership (from Dividend (from Reduction in Capital Gain Basis current E&P) accumulated E&P) Heath 60% Jetta 20% Ashley 20% 2. How is the June 1" distribution taxed to Heath? Please use the table below. Also, why doesn't I.R.C. 302(b)(1) or 302(b)(2) apply to her redemption? June 1 Distribution Dividend (from Dividend (from Reduction in Capital Gain Basis current E&P) accumulated E&P) Heath