Samson Corporation has 1,000 shares of common stock outstanding. Sal owns 560 shares, Rita owns 250 shares, and Susan owns 190 shares. None of the owners are related. On August 14 Samson redeemed 150 shares from Sal. Sal’s adjusted basis in the 560 shares was $28,000. In return for the 150 shares, Sal received $17,000. Samson’s current E&P was $45,000. Sal prefers to receive sale or exchange treatment.

a. Indicate if Sal might be able to receive sale or exchange treatment.

b. Indicate the tax consequences to Sal if the redemption is treated as a dividend or if it is treated as a sale or exchange.