Which of the Following Is an Incorrect Statement Regarding the Tax

question 90

Multiple Choice

Which of the following is an incorrect statement regarding the tax consequences of a § 306 stock disposition?

• A) In a sale of § 306 stock, the shareholder generally recognizes ordinary income equal to the fair market value of the preferred stock on the date it was acquired in the stock dividend.
• B) No loss is recognized on a sale of § 306 stock.
• C) The issuing corporation's E & P is not reduced by a sale of § 306 stock.
• D) In a redemption of § 306 stock, the shareholder generally recognizes dividend income equal to the amount of the redemption proceeds.
• E) None of these.

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