Seven years ago, Nancy transferred property she had used in her sole proprietorship to EB Corporation for $4000$ shares of EB Corporation in a transaction that qualified under $351.$ The assets had a tax basis to her of $$400000$ and a fair market value of $ $700000$ on the date of the transfer. In the current year, EB Corporation $($E & P of $ $1$million$)$ redeems $700$ shares from Nancy for $ $$360000$ in a transaction that qualifies for sale or exchange treatment. With respect to the redemption, Nancy will have a

$1.$$$140000$ dividend

$2.$ $$260000$ dividend

$3.$ $$140000$ capital gain

$4.$ $$290000$ capital gain

$5.$ None of the above