Swift Corporation distributes land (basis of $55,000 and fair market value of $120,000) to Sam and cash ($240,000) to Allison in exchange for part of their stock. Other shareholders do not redeem any of their stock. Sam surrenders shares of stock that have a basis of $25,000. Prior to the stock redemption, Sam owned 20% of the Swift stock, and after the redemption, he owns 15%.
At the same time, Swift distributes cash to Allison, and she surrenders shares of stock with a basis of $40,000. Prior to the stock redemption, Allison owned 70% of the Swift stock, and after the redemption, she owns 60%.
Determine the tax consequences to Swift, Sam, and Allison if Swift is:
a. A C corporation.
b. An S corporation.