In 20X5, R received 20 shares of preferred stock as a distribution with respect to his XYZ common. The preferred was worth $10,000 and R assigned a basis of $6,000 to it. At the time of distribution, the corporation had substantial earnings and profits. XYZ redeemed R's preferred stock for $13,000 this yea when its earnings and profits were $8,000. R will report

	a. capital gain of $7,000, and his basis for common will be unaffected.
	b. dividend income of $7,000, and his basis for common will increase.
	c. dividend income of $8,000, and his basis for common will increase.
	d. dividend income of $7,000, and his basis for common will be unaffected.
	e. none of the above.