Hubert receives a nontaxable stock dividend of 100 shares of preferred stock (fair market value of $200,000) from Owl Corporation, at a time when Owl's E & P is $800,000. As a result of the stock dividend, Hubert properly allocates $30,000 of his common stock basis to the preferred stock. Two years after the stock dividend, Hubert sells the preferred stock to Tomas, an unrelated party, for $250,000. Owl's E & P at the time of the sale is $900,000. With respect to the sale of the preferred stock, Hubert has:

a.Long-term capital gain of $220,000.

b.Ordinary income of $200,000 and a long-term capital gain of $20,000.

c.Ordinary income of $250,000.

d.Dividend income of $200,000 and a long-term capital gain of $50,000.