Half Moon Corporation Made a Distribution of $300,000 to Arnold

Essay

Half Moon Corporation made a distribution of $300,000 to Arnold Swartz in partial liquidation of the company on December 31,year 1.Arnold owns 100% of Half Moon Corporation (1,200 shares).The distribution was in exchange for 50% of Arnold's stock in the company (600 shares).At the time of the distribution,the shares had a fair market value of $500 per share.Arnold's income tax basis in the shares was $250 per share.Half Moon had total E&P of $2,000,000 at the time of the distribution.What is the amount and character (capital gain or dividend)of any income or gain recognized by Arnold as a result of the partial liquidation?