Tina owns 100 percent of the common stock of Lotus Corporation. During 2018, when its earnings and profits were $3,500, Lotus issued preferred stock worth $5,000 as a nontaxable stock dividend to Tina. In 2019, when Lotus earning, and profits were $5,000, Tina sold the preferred stock to an unrelated person for $5,000.

Assume the same fact as above, except that Tina has Lotus redeem her the preferred stock for $5,000 in 2019. What amount of redemption proceeds will be recognized by Tina dividend income? $0 $2,500 $3,500 $5,000