Question: Ken purchased 10 000 shares of Gold Corporation common stock six
Ken purchased 10,000 shares of Gold Corporation common stock six years ago for $160,000. In the current year, Ken received a preferred stock dividend of 800 shares, while the other holders of common stock received a common stock dividend. The preferred stock that Ken received is worth $80,000, and his common stock has a fair market value of $240,000. Assume that Gold holds ample E & P to cover any distributions made during the year. What is Ken’s basis in the preferred and common stock after the dividend is received? When does his holding period commence for the preferred stock?
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