If there is sufficient E & P, a distribution of nonconvertible preferred stock to common shareholders is taxable
a. True
b. False
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False
RATIONALE: As a general rule, stock dividends are excluded from income only if they are pro rata distributions of stock or stock rights, paid on common stock. A non pro rata distribution would be taxable. The question provides no information about whether the distribution was (or was not) pro rata, so the correct answer is false.
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