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Ellen sells her Section 306 stock during the year for $16,000. Her basis in the stock was $2,000. In 2006, when she received the stock, its fair market value was $12,000 and the corporation's earnings and profits were $10,000. Assuming that Ellen retains her common stock, the result of the sale is:

A. $14,000 ordinary (dividend) income.

B. $14,000 long-term capital gain.

C. $10,000 ordinary (dividend) income and $4,000 long- term capital gain.

D. $12,000 ordinary (dividend) income and $2,000 long-term capital gain.

Accounting Basics, Accounting

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