C and D organized Z corporation 10 years ago, each contributing $40,000 and each receiving 400 shares of common stock. Five years ago, in June, Z declared a one for one dividend payable in pure preferred with a $400 fair market value. The value of the common stock after the distribution was $1600 per share. In that year, five years ago, Z had accumulated E&P of $52,000 and current E&P of $12,000. In the current year, Z has accumulated E&P of $112,000 and current E&P of $8000.In December of the current year, shortly after receiving the preferred stock, C contributed to a charity and the charity shortly thereafter sells it to Z corporation for $36,000.

a. C has a charitable contribution of $36,000.

b. Cs charitable contribution is reduced by the ordinary income component of $32,000 resulting in a charitable contribution of $4,000.

c. The IRS might argue that there is no charitable contribution but rather a straight sale to the corporation Z by C resulting in $36,000 of ordinary income.

d. B and C.

e. None of the above.

Please explain why you choose this answer. Thank you.