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

Quizplus · Accepted Answer

Connie has $50,000 of ordinary income because the sale of § 306 stock is treated as a sale of a dividend equivalent, resulting in ordinary income rather than capital gain.

Connie Sold 400 Shares of § 306 Stock Basis of $20,000)