During the current year, Gnatcatcher, Inc. (E & P of $1 million), distributed $200,000 each to Brandi

Question:

During the current year, Gnatcatcher, Inc. (E & P of $1 million), distributed $200,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 32% tax bracket, and each had a $45,000 basis in her redeemed stock.
a. Assume that the distribution to Brandi is a qualifying stock redemption. Determine Brandi's tax liability on the distribution.
b. Assume that the distribution to Yuen Is a non-qualified stock redemption. Determine Yuen's tax liability on the distribution.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...