Corporation has a single class of common stock outstanding. Tabitha owns 1,000 shares, which she purchased five years ago for $120,000. Rose declares a stock dividend payable in 8% preferred stock having a $50 par value. Each shareholder receives one share of preferred stock for ten shares of common stock. On the distribution date—January 2 of the current year—the common stock was worth $95 per share, and the preferred stock was worth $50 per share. On April 1 of the current year, Tabitha sells half of her preferred stock for $9,200. a. How much income must Tabitha recognize when she receives the stock dividend? b. How much gain or loss must Tabitha recognize when she sells the preferred stock? (Ignore the implications of Sec. 306.) c. What is Tabitha's basis in her remaining common and preferred shares after the sale? When does her holding period for the preferred shares begin?
Corporation has a single class of common stock outstanding. Tabitha owns 1,000 shares, which she purchased five years ago for $120,000. Rose declares a stock dividend payable in 8% preferred stock having a $50 par value. Each shareholder receives one share of preferred stock for ten shares of common stock. On the distribution date—January 2 of the current year—the common stock was worth $95 per share, and the preferred stock was worth $50 per share. On April 1 of the current year, Tabitha sells half of her preferred stock for $9,200. a. How much income must Tabitha recognize when she receives the stock dividend? b. How much gain or loss must Tabitha recognize when she sells the preferred stock? (Ignore the implications of Sec. 306.) c. What is Tabitha's basis in her remaining common and preferred shares after the sale? When does her holding period for the preferred shares begin?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter13: Corporations: Earning & Profits And Distributions
Section: Chapter Questions
Problem 29P
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Question
Corporation has a single class of common stock outstanding. Tabitha owns 1,000 shares, which she purchased five years ago for $120,000. Rose declares a stock dividend payable in 8% preferred stock having a $50 par value. Each shareholder receives one share of preferred stock for ten shares of common stock. On the distribution date—January 2 of the current year—the common stock was worth $95 per share, and the preferred stock was worth $50 per share. On April 1 of the current year, Tabitha sells half of her preferred stock for $9,200.
|
a.
|
How much income must
Tabitha
recognize when she receives the stock dividend? |
|
b.
|
How much gain or loss must
Tabitha
recognize when she sells the preferred stock? (Ignore the implications of Sec. 306.) |
|
c.
|
What is
Tabitha's
basis in her remaining common and |
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