LO.7 Katie purchased 5,000 shares of Grebe Corporation common stock six years ago for $80,000. In the current year, Katie received a preferred stock dividend of 400 shares, while the other holders of common stock received a common stock dividend. The preferred stock Katie received has a fair market value of $40,000, and her common stock has a fair market value of $120,000. Assume that Grebe has ample E & P to cover any distributions made during the year. What is Katie’s basis in the preferred and common stock after the dividend is received? When does her holding period commence for the preferred stock?