Sally, a SINGLE lady, owns 100% of Tom Corp’s OUTSTANDING stock. Her basis in the

Sally, a SINGLE lady, owns 100% of Tom Corp’s OUTSTANDING stock. Her basis in the stock is $200,000. She had owned the stock for 3 years. E & P of $300,000 exists (a combination of accumulated – $200,000 – and current – $100,000). On the last day of the year – 12/31 – Tom Corp redeems 80% of Sally’s stock for $600,000! Result is that Sally will, from an income perspective, have which of the following –

a.Dividend of $600,000

b.Capital Gain of $400,000

c,Capital Gain of $440,000

d. Dividend of $300,000, Capital Gain of $140,000

e. None of the above