Which of the following is an incorrect statement regarding the tax consequences of a § 306 stock sale?
A) The shareholder generally recognizes capital gain equal to the fair market value of the preferred stock on the date of the stock dividend.
B) No loss is recognized on the sale.
C) Any ordinary income recognized by the shareholder qualifies for the 15% (or 0%) maximum tax rate that applies to dividend income.
D) The sale does not affect the issuing corporation's E & P.
E) None of the above.
Correct Answer:
Verified
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