Tivee is a media company that produces animated sitcoms.Tivee has five shareholders: Carry, Nomer, Ted, Chloe, and Carry's grandmother. Carry and Nomer are married, and Ted and Chloe are unrelated to the other. Each of the shareholders owns 20% of the 1,000 shares of Tivee 's outstanding common stock. The overall net value of the corporation is $5 million. The corporation decided to redeem Carry completely and distributed $1 million cash in return for all of her stock. The corporation’s current earnings and profits for the year of the redemption is $2.5 million. It has no accumulated e&p. Carry’s basis in her shares was $300,000.

Follow up Questions:

a. What if Tivee distributed property worth $1 million (with a basis to Tivee of $250,000) instead of cash to remove Carry’s stock?

b. What if Tivee redeemed only ten shares of Chloe’s stock and no stock from Carry? Chloe’s basis in the redeemed shares was $20,000.

c. . Would the results in 1 change if all five shareholders had agree to a “buy out” arrangement pursuant to which each agreed to first offer sale of the shares to the other shareholders before selling to a third party?

d. Would answers to any of the above change if, in addition to their interests in Tivee Carry and Chloe were partners in an unrelated partnership?