Larry, the sole shareholder of Brown Corporation, sold his stock to Ed on July 30 for $270,000. Larry's basis in the stock was $200,000 at the beginning of the year. Brown had accumulated E & P of $120,000 on January 1 and current E & P of $240,000. During the year, Brown made the following distributions: $450,000 cash to Larry on July 1 and $150,000 cash to Ed on December 30.

If an amount is zero, enter "0".

a. How will Larry and Ed be taxed on the distributions? Larry will have the following: Dividend income: $ Return of capital: $ Capital gain: $

Ed will have the following: Dividend income: $ Return of capital: $ Capital gain: $

b. How much gain will Larry recognize on the sale of his stock to Ed? Larry recognizes a capital gain of $ on the sale of the stock.