On January 1, 2011, Moses, Ethan, Christie and Rodney formed

On January 1, 2011, Moses, Ethan, Christie and Rodney formedButterfly, Inc., a manufacturing company to be taxed as a Subchapter Ccorporation. Moses contributed (i) cash in the amount of $100,000, and (ii)equipment having a basis of $120,000 and fair market value of $125,000 inexchange for 225 common, voting shares of the corporation. Ethan contributed abuilding with a basis of $100,000 and fair market value of $125,000 in exchangefor 125 common, voting shares of the corporation. Christie contributed $25,000in cash in exchange for 25 commons, voting shares of the corporation. Rodneycontributed a capital asset having a basis of $15,000 and fair market value of$25,000 in exchange for 25 common, voting shares of the corporation. It shouldbe noted that Moses is the biological father of Ethan and the adoptive fatherof Christie. Rodney is unrelated to Moses, Ethan or Christie.  During 2011, Butterfly, Inc. had earnings and profits fromoperations of $50,000. No distributions were made to the shareholders during2011, however, on December 31, 2011, the corporation redeemed 25 shares of Moses’sshares for $30,000 in cash.During 2011, Butterfly, Inc. had earnings and profits fromoperations of $125,000. On December 31, 2012, the corporation made adistribution to the shareholders in the amount of $200 per share.During 2013, the corporation had earnings and profits fromoperations of $95,000, however, no distributions were made to the shareholdersduring 2013.On January 1, 2014, the corporation redeemed the remaining200 shares of Moses in exchange for $150,000 in cash and the equipmentcontributed by Moses (then having a fair market value of $150,000). During 2014,the corporation had $5,000 earnings and profits from operations (exclusive ofany gain on the distribution of the equipment to Moses, but inclusive of anytax liability of the corporation relating to such distribution). On December31, 2014, the corporation made a distribution to the remaining shareholders inthe amount of $300 per share.On January 1, 2015, the Alabama Group acquired all of theshares of the Butterfly, Inc. from Ethen, Christie and Rodney for $1,250 pershare.Assume that (i) no cash distributions were made to anyshareholder, except as provided herein, (ii) all earnings and profits generatedduring the years of operation resulted from cash transactions out of thecorporation’s operations, (iii) no depreciation occurred on any asset for anyyear, and (iv) the fair market value of the assets remained the same at alltimes, except as provided herein. Discuss, in detail, the implications to allparties (inclusive of the corporation) of each transaction identified in theabove fact pattern. N/B: Answer should be at least 10 pages. Substantiate analysis and calculations with IRS CodeSections.