November 9, 2019 distribution. Pur- suant to paragraph (d)(5)(ii)(D)(2) of this section, $120 of the $300 distribu- tion is characterized as a distribution of CE&P. Pursuant to paragraph (d)(5)(ii)(C)(2)(ii) of this section, the amount of X’s AE&P available to allo- cate the November 9, 2019 distribution is $0. Therefore, the remaining $180 is characterized pursuant to section 301(c)(2) and (3). Pursuant to paragraph (d)(5)(ii)(C)(1)(i) of this section, A’s basis in its X stock prior to the Novem- ber 9, 2019 distribution is $150. There- fore, $150 is applied against basis pursu- ant to section 301(c)(2) (reducing A’s basis to $0) and $30 is treated as gain from the sale or exchange of property pursuant to section 301(c)(3).
