High Technologies, Inc. is a small semiconductor company owned an operated by Thelma High and Allen Woody. Thelma and Allen formed Hi-Tech three years ago by each contributing $400,000 in exchange for 50% of the corporation's common stock. Hi-Tech has been planning a major expansion of its manufacturing facility and has decided to seek outside financing. It recently approached Jennifer Leech about the possibility of her investing $200,000 in Hi-Tech.

After investigating the corporation's financial position, Jennifer has decided to make the investment. Her objectives are to obtain maximum security while at the same time participating in Hi-Tech's potential growth. Jennifer also is concerned about the rapid change in computer technology and would like to plan for the most favorable tax consequences in the unfortunate event that her investment in Hi-Tech becomes worthless. Consider to what extent Jennifer will realize her economic and tax goals if, in the alternative, her investment takes the following forms.

(a) $200,000 of Hi-Tech convertible preferred stock.