Tan Corporation (E&P of $700,000) has 1,000 shares of stock outstanding owned by two unrelated individuals, Jacob (600 shares) and Julie (400 shares). Both shareholders paid $75 per share for the stock six years ago. In the current year, Tan Corporation redeems 300 shares of Jacob's stock for $320,000.
a. What are the tax consequences of the stock redemption to Jacob?
b. What are the tax consequences of the stock redemption to Tan Corporation?