The 200 shares of Long Corporations common stock are held as follows:

Shareholder # of Shares Matt 50 Mark 60 Jason 90

Matt purchased shares for $200 each on September 30, 2016. Assume Matt, who is Marks father, sells 40 of his shares to the Corporation for $12,000.

(1) Will the sale qualify as a substantially disproportionate (or disproportionate) redemption? In your answer, discuss the requirements for a substantially disproportionate redemption and show supporting computations. (2) Will the sale qualify as a redemption that is not essentially equivalent to a dividend? Provide an explanation for your conclusion. (3) Without prejudice to your answer in Parts (1) or (2), assume that the sale qualifies as a substantially disproportionate redemption. What will be the amount and nature of the income Matt must recognize (assume the sale took place on March 1, 2020, and that Longs E&P for 2020 is $75,000). (4) What effect will the sale have on Longs E&P balance?