Hazel, Emily, and Frank, Unrelated Individuals, Own All of the Stock

Multiple Choice

Hazel, Emily, and Frank, unrelated individuals, own all of the stock in Wren Corporation (E & P of $1.2 million) as follows: Hazel, 1,300 shares; Emily, 400 shares; and Frank, 300 shares.Wren redeems 300 of Hazel's shares (basis of $60,000) for $450,000.With respect to the distribution in redemption of the stock:

A) Hazel has a capital gain of $390,000.
B) Hazel has dividend income of $450,000.
C) Hazel has dividend income of $390,000.
D) Hazel has a capital gain of $450,000.
E) None of the above.