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

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