Currently, Brown Corporation (E & P of $800,000) Has 1,000

Multiple Choice

Currently, Brown Corporation (E & P of $800,000) has 1,000 shares of common stock outstanding.Pat owns 200 shares.His wife owns 400 shares, his daughter owns 100 shares, and his father owns 300 shares.Two years ago, Pat transferred $30,000 to Brown Corporation in exchange for 100 newly issued shares of nonvoting preferred stock.In the current year, Brown Corporation redeems Pat's preferred stock for $50,000, its fair market value.With respect to the distribution in redemption of the preferred stock:

A) Pat has a long-term capital gain of $20,000.
B) Pat has a long-term capital gain of $50,000.
C) Pat has dividend income of $20,000.
D) Pat has dividend income of $50,000.
E) None of the above.