Corporation X had outstanding 100 shares of voting common stock of which A and B each owned 50 shares. In order to bring C into the business with an equal stock interest, and pursuant to an integrated plan, A and B caused X to issue, at fair market value, 25 new shares of voting common stock to C. Immediately thereafter, as part of the same plan, A and B caused X to redeem 25 shares of X voting common stock from each of them. Neither A, B, nor C owned any stock of X indirectly under section 318 of the Internal Revenue Code of 1954. The transaction:
O is a substantially disproportionate redemption of stock
O is not a substantially disproportionate redemption of stock
O is disqualified because the sequence of events is not part of an overall plan
O is disqualified because redemption cannot be accompanied by the issuance of new shares of stock
O is disqualified because redemption cannot be accompanied by the sale of stock