Carol, Bonnie, and Ann, sisters, own 300 shares, 300 shares, and 400 shares, respectively, in Teal Corporation (E & P of $600,000). Teal Corporation redeems all of Ann's stock for $250,000. Ann paid $100 a share for the stock five years ago. Ann continued to serve as president of Teal after the redemption. With respect to the redemption: