Stock Dividend Distribution. Moss Corporation has a single class of common stock outstanding. Tillie owns 1,000 shares, which she purchased five years ago for 100,000. Moss declares a stock dividend payable in 8% preferred stock having a 100 par value. Each shareholder receives one share of preferred stock for ten shares of common stock. On the distribution date January 2 of the current year the common stock was worth 180 per share and the preferred stock was worth 100 per share. On April 1 of the current year Tillie sells half of her preferred stock for 5000.

a. how much income must Tillie recognize when she receives the stock dividend?

b. how much gain or loss must Tillie recognize when she sells the preferred stock (ignore the implications of sec 306)

c. what is Tilles basis in her remining common and preferred shares after the sale? when does her holding period for the preferred shares being?