Hubert,the Sole Shareholder of Owl Corporation,receives a Nontaxable Stock Dividend

Hubert,the sole shareholder of Owl Corporation,receives a nontaxable stock dividend of 100 shares of preferred stock from Owl (E & P of $120,000) .As a result of the stock dividend,Hubert properly allocates $40,000 of his common stock basis to the preferred stock.Two years after the stock dividend,Hubert sells the preferred stock to Thomas,an unrelated party,for $150,000.Owl's E & P at the time of the sale is $300,000.With respect to the sale of the preferred stock:

A) Hubert has ordinary income of $150,000.
B) Hubert has a long-term capital gain of $110,000.
C) Owl Corporation reduces its E & P by $120,000.
D) Owl Corporation reduces its E & P by $150,000.
E) None of the above.