Ruby, Inc, Has 2,000 Shares of Stock Authorized and 1,000 Shares

Multiple Choice

Ruby, Inc., has 2,000 shares of stock authorized and 1,000 shares outstanding.The shares are owned by Sophia (850 shares) and Joan (150 shares) .Sophia's adjusted basis for her stock is $40,000 and Joan's adjusted basis for her stock is $35,000.Ruby's earnings and profits are $100,000.Ruby redeems 75 of Joan's shares for $50,000.Determine the amount of Joan's recognized gain (1) if she is Sophia's mother and (2) if they are unrelated.

A) $0 and $0.
B) $50,000 and $50,000.
C) $50,000 and $-0-.
D) $50,000 and $32,500.
E) None of the above.