At the start of the current year, Red Corporation (a calendar year taxpayer) has accumulated E & P of $100,000. Red's current E & P is $60,000, and during the year, it distributes $200,000 ($100,000 each) to its equal shareholders, Michele and Wally. Michele's stock has a basis of $11,000 and Wally's stock has a basis of $26,000. How is the distribution treated for tax purposes?