Fred is the sole shareholder of Puce Corporation,having a basis of $90,000 in 1,000 shares of Puce common stock.Last year,Puce (E & P of $500,000)issued a dividend of 2,000 shares of preferred stock to Fred.On the date of distribution,the fair market values per share of the common and preferred stocks were $160 and $20,respectively.In the current year,Puce (E & P of $720,000)redeems all of Fred's preferred stock for its fair market value of $40,000.

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The Answer of Fred is the sole shareholder of Puce Corporation,having a basis of $90,000 in 1,000 shares of Puce common stock.Last year,Puce (E & P of $500,000)issued a dividend of 2,000 shares of preferred stock to Fred.On the date of distribution,the fair market values per share of the common and preferred stocks were $160 and $20,respectively.In the current year,Puce (E & P of $720,000)redeems all of Fred's preferred stock for its fair market value of $40,000.

Fred Is the Sole Shareholder of Puce Corporation,having a Basis