[The following information applies to the questions displayed below.] Boots, Incorporated is owned equally by Muhammad and his daughter Isabel, each of whom holds 1,000 shares in the company. Muhammad wants to retire from the company, and it was decided that the company will redeem all 1,000 of Muhammad's shares for $25,000 per share on December 31 of this year. Muhammad's tax basis in each share is $500. Boots, Incorporated has current E&P of $1,000,000, and accumulated E&P was $5,000,000 at the beginning of the year.b. If Muhammad remained as the chair of the board after the redemption, what are the amount and character of income (capital gain or dividend) that Muhammad will recognize this year?Capital gain Dividend

Marcia, a shareholder in a corporation with stores in five states, donated stock with a basis of 10,000 to a qualified charitable organization in 2018. Although the stock of the corporation was not traded on a public stock exchange, many shares had been sold over the past several years. Based on the average selling price for the stock in 2018, Marcia deducted 95,000 on her 2018 tax return. Marcia received a notice from the IRS that the 95,000 deduction had been reduced to 10,000 because she had not obtained a qualified appraisal or attached a summary of her appraisal to her tax return. Marcia has asked you to advise her on this matter. Write a letter containing your conclusions to Ms. Marcia Meyer, 1311 Santos Court, San Bruno, CA 94066. Partial list of research aids: Reg. 1.170A13(c)(2).