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Reveille Corporation experienced a complete loss of its lumber mill as a result of a fire. The company received $2 million from the insurance company.

Reveille Corporation experienced a complete loss of its lumber mill as a result of a fire. The company received $2 million from the insurance company. Rather than rebuild, Reveille decided to distribute the $2 million to its two shareholders. No stock was exchanged in return. Under what conditions will the distribution meet the requirements necessary to be treated as a partial liquidation and not a dividend? Why does it matter to shareholders?

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