A received a pro rata distribution of preferred stock from X Co. as a nontaxable stock dividend.

A's basis in the preferred stock is $2,000.

A's share of X Co.'s E&P at the time of the distribution was $20,000.

The FMV of the preferred stock was $9,000.

A sold the preferred stock three years after she received it for $30,000.

A's share of X Co.'s E&P at the time of the sale was $8,000.

A's recognized gain or loss due to the sale is

A received a pro rata distribution of preferred stock from X Co. as a nontaxable stock dividend.

1. A's recognized gain or loss due to the sale is?

$9,000 ordinary income, $19,000 capital gain.

$20,000 ordinary income, $8,000 capital gain.

None of these.

$8,000 ordinary income, $20,000 capital gain.

$28,000 capital gain.