Monica is a preferred stockholder with a basis of $9,000 in her 100 shares in Small Appliances Inc. She has one-half her stock redeemed for $6,000 in a transaction that qualifies as a sale, Small Appliances’s balance sheet prior to the redemption reads in part:

a. What is Monica's gain and its character?

b. What is her basis in the remaining shares?

c. What adjustments are to be made to the equity accounts?

d. What difference does it make if, instead of cash, Monica receives property with a basis of $4,000?

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Common stock, authorized, issued and outstanding, 10,000 shares, par $1 Paid-in-capital, common stock Preferred stock, authorized, issued and outstanding, 1,000 shares, par $5 Paid-in-capital, preferred stock Earnings and profits $10,000 40,000 5,000 20,000 76,000