Henry, Emmy, and Frannie, unrelated individuals, own all of the stock in New Corporation with earnings and

Question:

Henry, Emmy, and Frannie, unrelated individuals, own all of the stock in New with earnings and profits of $1,200,000 as follows: Henry own 1,300 shares; Emmy owns 400 shares; and Frannie owns 300 shares. New redeems 300 of Henry’s shares with a basis of $60,000 for $450,000. With respect to the in redemption of the stock:
a. Henry has a capital gain of $390,000.B. Henry has income of $450,000.C. Henry has income of $390,000.D. Henry has a capital gain of $450,000.E. None of the above.

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