Outstanding stock of crane corporation

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Leon owns all six hundred (600) shares of the outstanding stock of Crane Corporation (Earnings And Profits (E&P) of $1,000,000). Leon had acquired the stock ten (10) years ago for $450,000. Crane Corporation, which has several trades or businesses that it has developed and operated for more than five (5) years, sells one (1) of those trades or businesses and, in a transaction qualifying as a partial liquidation [under Section 302(b)(4)], redeems two hundred (200) shares of Leon's stock for $500,000. As a result of this transaction, Leon must recognize:

(a) $500,000 Long-Term Capital Gain.

(b) $500,000 Dividend Income.

(c) $350,000 Long-Term Capital Gain.

(d) $350,000 Dividend Income.

Reference no: EM13121456

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