Four unrelated shareholders own Benton Corporation€™s 400 shares of outstanding stock. As indicated below, Benton redeems a total of 100 shares for $500 per share from three of its shareholders. Each shareholder has a $230 per share basis in his or her stock. Benton€™s current and accumulated E&P at the end of the tax year is $150,000.

a. What are the tax consequences (e.g., basis of remaining shares and amount and character of recognized income, gain, or loss) of the redemptions to Ethel, Fran, and Georgia?
b. How would your answer to Part a change if Ethel were Georgia€™s mother?

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Shareholder Shares Held Before the RedemptionS Shares Redeemed Ethel 200 40 Fran 100 30 Georgia 50 30 Henry 50 Total 400 100