Three years ago, Darlene received preferred (§ 306) stock pursuant to a nontaxable stock dividend from Grackle Corporation. In the current year, Darlene gives the Grackle preferred stock to her sister, Nancy. The Grackle preferred stock is § 306 stock with regards to Nancy.

Question

Quizplus · Accepted Answer

Because Darlene received the preferred stock as a nontaxable dividend, the stock retains the same attributes as it had in the hands of Grackle Corporation, including its status as § 306 stock. Therefore, when Darlene gives the stock to her sister, Nancy, it retains its § 306 status.

Three Years Ago, Darlene Received Preferred (§ 306) Stock Pursuant