Zenz set the tone for getting capital gain
treatment for liquidating distributions
, using a buyer of additional shares, in effect replacing Zenz as shareholder
. Regardless of E & P accumulated, capital gains treatment was allowed.
If you have a third party buyer (to circumvent the substantially disproportionate distribution problem), shareholder would be taxed based on sale proceeds at fmv less basis in the shares. Use the total amount offered, 27,500m.
Several sources were used to assemble this answer, including: http://www.staleylaw.com/images/Sell_Business_14199.2.pdf, http://www.leagle.com/xmlResult.aspx?page=2&xmldoc=19541127213F2d914_1888.xml&docbase=CSLWAR1-1950-1985&SizeDisp=7, and http://www.woodporter.com/Publications/Articles/ma/129901a.htm.
Thanks for a great question. Please provide positive feedback when you close out your question, or ask any supporting questions you may have.