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 regard to Nancy.

Question

Quizplus · Accepted Answer

When Darlene received the § 306 stock as a nontaxable stock dividend and later gifted it to her sister, Nancy, the stock retains its § 306 status in the hands of the recipient, Nancy. This means that certain tax consequences associated with § 306 stock, such as treating proceeds from its sale as ordinary income under specific conditions, apply to Nancy as well.

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