Yellowstone Corporation Made a Distribution of $300,000 to Cheney,Inc

Essay

Yellowstone Corporation made a distribution of $300,000 to Cheney,Inc.in partial liquidation of the company on December 31,year 1.Cheney,Inc.owns 50 percent of Yellowstone Corporation (1,000 shares).The other 50 percent is owned by an unrelated corporation.The distribution was in exchange for 50% of Cheney's stock in the company (500 shares).At the time of the distribution,the shares had a fair market value of $800 per share.Cheney's income tax basis in the shares was $500 per share.Yellowstone had total E&P of $5,000,000 at the time of the distribution.What is the amount and character (capital gain or dividend)of any income or gain recognized by Cheney as a result of the partial liquidation?