Larry owns 90 of the 100 outstanding shares of EDP Corporation. Larry acquired the 90 shares in 2007 for \(\$ 15,000\). He also owns 70 of the 100 outstanding shares of EDT Corporation. Larry acquired the 70 shares in 2010 for \(\$ 21,000\). On October 18, 2018, Larry sold 25 shares of EDT stock to EDP Corporation for \(\$ 43,000\). EDT and EDP have current E\&P in 2018 of \(\$ 22,000\) and \(\$ 31,000\), respectively.

a. How will the sale be treated for federal income tax purposes?

b. How much income, and what type, does Larry recognize?

c. What is his basis in his stock?

d. What is the effect of the transaction on EDP and EDT?