Kira Ratz purchased 100 shares of common stock in Lovan Furniture, Inc. for $4,000 on July 10, 2008. On August 3, 2010, Lovan Furniture distributed 50 shares of preferred stock to Kira as a taxable stock dividend. At the time of the distribution, the common stock was valued at $90 per share, and the preferred stock was valued at $20 per share. What is Kira's adjusted basis in the preferred stock, and when does her holding period begin?
A) Adjusted basis of $0; holding period beginning August 4, 2010.
B) Adjusted basis of $400; holding period beginning July 11, 2008.
C) Adjusted basis of $1,000; holding period beginning August 4, 2010.
D) Adjusted basis of $1,000; holding period beginning July 11, 2008.