A Corporation Is Owned 70% by Jones and 30% by Smith.Jones

Multiple Choice

A corporation is owned 70% by Jones and 30% by Smith.Jones owns 70 shares with a cost of $100 each.Smith owns 30 shares with a cost of $100 per share.Smith and Jones are not related.The company redeems Smith's 30 shares at a redemption price of $400 per share.No stock is redeemed from Jones.This is not a redemption to pay death taxes,and it is not a partial liquidation.Smith will recognize

A) dividend income of $12,000.
B) dividend income of $9,000.
C) capital gain of $12,000.
D) capital gain of $9,000.