A & B organized X 15 years ago, each contributing $10,000 and each receiving 100 shares of common stock. Five years ago in June, X declared a one for one dividend payable in pure preferred stock (paying 6% cumulative dividend on its par value, which equaled its then $100 FMV). The value of the common stock after the distribution was $400 per share. In that year, X had accumulated E&P of $13,000 and current E&P of $3,000. In the current year, X has accumulated E&P of $28,000 and current E&P of $2,000. What are the tax consequences of the disposition described in each situation?

What are the tax consequences of the disposition described in each situation below? Assume section 305(b) does not apply

a. In December of the current year, A sells all of As preferred stock to C for $9,000; in June of the next year, A sells all of As common stock to D for $50,000.

Alternatives:

(i) The sale to D took place in June of the current year. Also, what if C were As son?

(ii) Same as (i) above except that A sells the preferred back to X.

(iii) X has a S Corporation five years ago, with a $20,000 AAA in addition to the $13,000 accumulated E&P but no current E&P.