Connie sold 400 shares of § 306 stock (basis of $20,000) in Blackbird Corporation to Larry (an unrelated individual) for $50,000. When the § 306 stock was issued to Connie, the stock had a value of $50,000, and Blackbird had E & P of $500,000. At the time the § 306 stock is sold, Blackbird's E & P is $550,000. At the time of the sale, Connie owned 900 shares of common stock (basis of $210,000) in Blackbird. With respect to the sale of the § 306 stock by Connie:
Question 38 options:
A)
Connie has $50,000 of ordinary income.
B)
Blackbird Corporation reduces its E & P by $50,000.
C)
Connie has a $30,000 capital gain.
D)
After the sale, Connie has a $210,000 basis in the common stock.