Tim and his daughter, Mary, own and operate Tamar Corporation. Tim is nearing retirement and would like to transfer ownership of the corporation to Mary but would like to stay on as a paid consultant providing retirement planning for the corporation’s other employees. Tamar redeems all of Tim’s common stock and gives him a contract to provide employee retirement counseling. The contract states that Tim is to be paid a flat $60,000 for his services. Tamar will provide an office in the plant where he can interact with employees who take advantage of his services. Prepare a memo to Tim and Mary outlining the likely tax outcomes associated with the redemption of Tim’s stock and subsequent contractual services.