LO.4 Tammy and Willy own 40% of the stock of Roadrunner, an S corporation. The other 60% is owned by 99 other shareholders (all are single and unrelated). Tammy and Willy have agreed to a divorce and are in the process of negotiating a property settlement.

a. Identify the relevant tax issues for Tammy and Willy.

b. The divorce resulted in the Roadrunner stock being distributed equally to Tammy and Willy. What could either party do to change the tax status of Roadrunner?