Calvin owns 40% of the outstanding shares of Copernicus Corp., which has accumulated earnings and profits of $100,000 as of December 31, year 1. The outstanding shares not owned by Calvin are owned by parties unrelated to Calvin. On January 1 of year 2, Calvin, wishing to pursue another business opportunity, sells his stock back to Copernicus Corp. Copernicus distributes cash of $250,000 in redemption of all of Calvin’s stock. If Calvin’s adjusted basis for the stock on the date of redemption is $125,000, what will be the tax effect of the redemption to Calvin?

a. $125,000 capital gain

b. $25,000 dividend

c. $125,000 dividend

d. $150,000 dividend