As of January 1 of the current year, Yohan Corporation has E & P of $600,000. Yoshi owns 320 shares of Yohans common stock (the basis of $45,000). On that date, Yohan Corporation declares and distributes a nontaxable preferred stock dividend of which Yoshi receives 100 shares. Immediately after the stock dividend, the fair market value of one share of Yohan common stock is $500, and the fair market value of one share of Yohan preferred stock is $200. Two months later, Yoshi sells the 100 shares of preferred stock to an unrelated individual for $20,000.

A. Assuming Yoshi is in the 32% tax bracket, what are his income tax consequences resulting from the sale of the preferred stock?

B. What is the effect on Yohan Corporations E & P as a result of the sale of the preferred stock?