Tammy Olsen has owned 100% of the common stock of Green Corporation (basis of $75,000) since the corporation's formation in 2006. In 2013, when Green had E & P of $320,000, the corporation distributed to Tammy a nontaxable dividend of 500 shares of preferred stock (value of $100,000 on date of distribution) on her common stock interest (value of $400,000 on date of distribution). In 2014, Tammy donated the 500 shares of preferred stock to her favorite charity, State University. Tammy deducted $100,000, the fair market value of the stock on the date of the gift, as a charitable contribution on her 2014 income tax return. Tammy's adjusted gross income for 2014 was $420,000. Six months after the contribution, Green Corporation redeemed the preferred stock from State University for $100,000. Upon audit of Tammy's 2014 return, the IRS disallowed the entire deduction for the gift to State University, asserting that the preferred stock was 306 stock and that 170(e)(1)(A) precluded a deduction for contributions of such stock. What is the proper tax treatment for Tammy's contribution of Green Corporation preferred stock? Partial list of research aids: Reg. 1.170A4(b)(1). 306(b)(4).

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