Ms. T incorporated a company with an initial capitalization of 10 common shares @ $10 per share.

In the third year of operations, Ms. T acquired an additional 10 common shares @ $20 per share of paid-up capital equal to the fair market value.

Two years later, Ms. T caused the corporation to redeem 5 of her shares at the then fair market value of $50.

During this period, the corporation’s business income has been taxed at the low rate on business income.

REQUIRED

Indicate the tax consequences of the above transactions.