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d. Indicate whether the following statements are "True" or "False" regarding preferred stock bailouts. Any ordinary income resulting is treated as a dividend for purposes of the preferential tax rate on dividend income but has no effect on the issuing corporation's E&P. b. No loss is recognized on the sale of the preferred stock. In the case of a sale of 5 306 stock to a third party, the shareholder generally has capital gain income on the sale equal to the fair market value of the preferred stock on the date of the stock dividend. C