XYZ Corporation, a calendar year taxpayer, has only common stock outstanding. Mr. Adams, an individual, owns all 100 shares; 25 were acquired on 1/1/2007 for $25 (block 1) and 75 were acquired on 1/1/2008 for $175 (block 2). On December 31, when XYZ Corporation had earnings and profits of $100, it made a $300 distribution on the common stock. What is the treatment of the distribution?

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