Bruce Wayne, the sole owner of Batarang, Inc., a manufacturer of super hero gimmicks, received a non-taxable preferred stock dividend in 2005.

Bruce Wayne, the sole owner of Batarang, Inc., a manufacturer of super hero gimmicks, received a non-taxable preferred stock dividend in 2005. After distribution, he held 900 shares of the common (FMV: $100 per share (basis: $10 per share) and 100 shares of preferred, FMV: $100 per share). Batarang had $5,000 E&P.  In 2010 he gave the preferred to his son, Damien. In 2016, Batarang redeems all of the stock from Damien for $15,000. E&P at the time of redemption was $25,000.  With respect to the stock redemption: