can you explain the test rule and how the problem was solve

Prob 3 A, B and Cown stock of Randall Corporation (E & P $1,000,0000) as follows: A owns 600 shares, B owns 400 shares and C owns 1000 shares. Randall redeems 500 shares of C for $300,000. C paid $1 per share several years ago. Calculate the effect on C for this redemption Pre Redemption Post Red 600 600 Test 1 0.4 B 400 400 .33 less than .4 1000 500 Test 2 Less than 50% 2000 1500 Ownership 0.5 0.333333 Capital gain 299500