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 or loss of $ _____________on the property distribution. Grace would have dividend income of $___________.

b. If Grace is a corporation and the distribution is a nonqualified stock redemption, then it would have dividend income of $____________, but only $________ is subject to tax because of the dividends received deduction capital gains deduction. Teal Corporation would have a ___________

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 $_______________. Grace would have a capital gain dividend income of $______________

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 a__________of $, and Teal Corporation would have a ___________of $_________________.

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?