Teal Corporation, with E & P of $2,000,000, distributes property with a basis of $150,000 and a fair market value of $400,000 to Grace. She owns 15% of the outstanding Teal shares.

a.If the distribution is a nonqualified stock redemption, Teal Corporation would have a gain of $fill in the blank f2e83df94025fbf_2

on the property distribution. Grace would have dividend income of $fill in the blank f2e83df94025fbf_3

.

b.If Grace is a corporation and the distribution is a nonqualified stock redemption, then it would have dividend income of $fill in the blank ee7c3b0a3feb06d_1

, and $fill in the blank ee7c3b0a3feb06d_2

is subject to tax because of the dividends received deduction. Teal Corporation would have a of $fill in the blank ee7c3b0a3feb06d_5

.

c.If the $400,000 distribution is a qualifying stock redemption and half of Grace's (an individual) stock (basis of $90,000) is redeemed in the transaction, then Teal Corporation would have a of $fill in the blank 1e55fefca06d045_2

. Grace would have a of $fill in the blank 1e55fefca06d045_4

.

d.If the distribution is a qualifying stock redemption, half of Grace's stock (basis of $90,000) is redeemed in the transaction, and if Grace is a corporation, then it would have of $fill in the blank 1ecba2fdbfac06b_2

, and Teal Corporation would have a of $fill in the blank 1ecba2fdbfac06b_4

.

e.Which option would Grace choose if it were a corporation?

Which option would Grace choose if she were an individual?

Which option would Teal choose?