Provide a structuring solution for the proposed transaction that will assist the client in achieving its objectives outlining the current and potential future tax consequences of the sale to the private equity firm.  Please make sure that you comment on the tax consequences and attributes to RBI and all of its shareholders (i.e., Rutsey, Lifeson, Peart, and Lee)
 

Lee, Lifeson and Peart each contributed $100,000 cash to RBI and Rutsey contributed 500 shares of publicly traded ABC stock worth $100,000. Rutsey's shares of ABC stock represented less than 5% of the total shares of ABC stock outstanding.  For their contributions, each individual received 100 shares of RBI common stock.  Rutsey's basis in the ABC stock was $80,000 at the time of the contribution.
 

In January of 2019, RBI decided to sell all of its stock in ABC company to purchase more equipment as demand for its products continued to exceed expectations.  Unfortunately, the ABC Stock had declined in value since its contribution by Rutsey and the stock was only worth $60,000.  RBI utilized these $60,000 of proceeds from the sale of ABC stock plus another $120,000 of loan proceeds from a bank borrowing to purchase additional manufacturing equipment.
 

Prior to the sale of the ABC stock, RBI had received dividends from ABC in the amount of $3,000 in 2018 and $1,000 in 2019.

In September of 2020, Rutsey agreed to resign from employment of RBI and also agreed to have RBI redeem 80 of his 100 shares of common stock.  On September 15, 2020, RBI distributed $150,000 to Rutsey in return for 80 shares of his common stock (i.e., $1,875 per share).
 

October of 2023, deciding to sell to a private equity firm. Currently RBI is valued at $960,000 (i.e., $3,000 per share)  The three active RBI shareholders would like to cash out Rutsey's remaining interest as part of the deal, but do not necessarily want to receive any cash in the transaction.  PEF is willing to invest $1,000,000 cash in RBI; most of which be utilized to expand RBI's business but some of which will be utilized to buy out Rutsey's interest. PEF has also agreed that Lee, Lifeson and Peart will each be issued 20 options to purchase one share of stock for $3,000.  Such options will be exercisable after 3 years or pursuant to a public offering, whichever comes first.  The options will expire after 5 years.