Ten individuals each own 10,000 of 100,000 shares of stock outstanding.

One of the individuals wants cash to buy a beach house and convinces all of the shareholders to consent to a redemption of 5,000 shares of stock. The corporation will repurchase the 50,000 total shares of stock using funds it has on hand. What is the proper tax treatment of this share redemption, from the point of view of the individuals?

A. The redemption should be treated as either a sale or dividend at the shareholder's discretion.

B. The redemption should be a non-taxable transaction.

C. The redemption should be treated as either a sale or a non-taxable transaction at the shareholder's discretion.

D. The redemption should be treated as a dividend.