In January 2013, Joan Hill bought one share of Orban Corp.
stock for $300. On March 1, 2013, Orban distributed one share
of preferred stock for each share of common stock held. This
distribution was nontaxable. On March 1, 2013, Joan’s one share
of common stock had a fair market value of $450, while the preferred
stock had a fair market value of $150.
After the distribution of the preferred stock, Joan’s bases for
her Orban stocks are
Common . . . . Preferred