Tammy Olsen has owned 100% of the common stock of Green Corporation (basis of $75,000) since the corporation’s formation in 2011. In 2018, when Green had E & P of $320,000, the corporation distributed to Tammy a nontaxable dividend of 500 shares of preferred stock (value of $100,000 on date of distribution) on her common stock interest (value of $400,000 on date of distribution). In 2019, Tammy donated the 500 shares of preferred stock to her favorite charity, State University. Tammy deducted $100,000, the fair market value of the stock on the
date of the gift, as a charitable contribution on her 2019 income tax return. Tammy’s adjusted gross income for 2019 was $420,000. Six months after the contribution, Green Corporation redeemed the preferred stock from State University for $100,000. Upon audit of Tammy’s 2019 return, the IRS disallowed the entire deduction for the gift to State University, asserting that the preferred stock was § 306 stock and that § 170(e)(1)(A) precluded a deduction for contributions of such stock. What is the proper tax treatment for Tammy’s contribution of Green Corporation preferred stock?

Partial list of research aids:
Reg. § 1.170a–4(b)(1).
§ 306(b)(4).