Julio Gonzales is in the 32% tax bracket. He acquired 6,000 shares of stock in Gray Corporation seven years ago at a cost of $200 per share. In the current year, Julio received a payment of $900,000 from Gray Corporation in exchange for 3,000 of his shares in Gray. Gray has E & P of $6,000,000. What income tax liability would Julio incur on the $900,000 payment in each of the following situations? Assume that Julio has no capital losses and taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%.

a. The stock redemption qualifies for sale or exchange treatment.

Julio has ________of $. _________Julio's tax liability would be $. ________

b. The stock redemption does not qualify for sale or exchange treatment.

Julio has _________of $. __________Julio's tax liability would be $. ___________

c. For part (b), prepare Julio's Schedule B (Form 1040) to reflect the tax reporting required of the transaction.