Sandi owns all 100 shares of Bonsai Corporation stock having a $0.95 million FMV. Her basis in the stock is $600,000. Bonsai's E&P balance is $350,000. Tom would like to purchase the stock but wants only the corporation's non-cash assets valued at $750,000. Tom is willing to pay $750,000 for these assets.

a. What are the tax consequences to Sandi, Tom, and Bonsai if Tom purchases 75 shares of Bonsai stock for $750,000 and Bonsai redeems Sandi's remaining 25 shares for $200,000 cash? b. How would your answer to Part a change (if at all) if Bonsai first redeems 25 shares of Sandi's stock for $200,000 and then Tom purchases the remaining 75 shares from Sandi for $750,000?