LO.7 For the last 11 years, Lime Corporation has owned and operated four differ- ent trades or businesses. Lime also owns stock in several corporations that it purchased for investment purposes. The stock of Lime is held equally by Sultan, an individual, and by Turquoise Cor- poration. Sultan and Turquoise each own 1,000 shares in Lime, purchased 9 years ago at a cost of $200 per share. Determine whether either of the following independent transactions qualify as partial liquidations under 302(b)(4). In each transaction, determine the tax conse quences to Lime, to Turquoise, and to Sultan. Lime holds E & P of $2.1 million on the date of the distribution. Lime redeems 250 shares from each shareholder.

a. Lime sells one of its business lines (basis $500,000, fair market value $700,000) and distributes the proceeds equally to Sultan and Turquoise.

b. Lime equally distributes stock (basis $425,000, fair market value $700,000) that it holds in other corporations to Sultan and Turquoise.