A received a pro rata distribution of preferred stock from X Co. as a nontaxable stock dividend.
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Question:
A received a pro rata distribution of preferred stock from X Co. as a nontaxable stock dividend.
A's basis in the preferred stock is $2,000.
A's share of X Co.'s E&P at the time of the distribution was $20,000.
The FMV of the preferred stock was $9,000.
A sold the preferred stock three years after she received it for $30,000.
A's share of X Co.'s E&P at the time of the sale was $8,000.
A's recognized gain or loss due to the sale is
A received a pro rata distribution of preferred stock from X Co. as a nontaxable stock dividend.
1. A's recognized gain or loss due to the sale is?
$9,000 ordinary income, $19,000 capital gain.
$20,000 ordinary income, $8,000 capital gain.
None of these.
$8,000 ordinary income, $20,000 capital gain.
$28,000 capital gain.
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