Suppose I invest $21,000 in a privately held start-up company and receive 21,000 shares of preferred stock (par value of $1 per share) and 10,000 shares of common stock. The Company has agreed to redeem all shares of preferred stock prior to making any dividends or redemptions of common stock. There is no public market for either security.
At some later date, should I want to sell some of the common stock, how do I determine the cost basis of the common stock sale? Can I choose to allocate the original total cost anyway I like between the common and preferred?
