You owned 100 shares of stock in BigCo, Inc., when it did a tax-free stock split (or “stock dividend,” as your textbook authors insist on calling it). Now you have 200 shares! You had paid $50 per share when you bought your original 100 shares. After the stock split, what is your tax basis in – your original 100 shares? your “new” 100 shares?

You owned 100 shares of stock in BigCo, Inc., when it did a tax-free stock split (or “stock dividend,” as your textbook authors insist on calling it). Now you have 200 shares! You had paid $50 per share when you bought your original 100 shares. After the stock split, what is your tax basis in – your original 100 shares? your “new” 100 shares?

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter13: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 43P

See similar textbooks

Similar questions

You owned 100 shares of stock in BigCo, Inc., when it did a tax-free stock split (or “stock dividend"). Now you have 200 shares! You had paid $50 per share when you bought your original 100 shares. After the stock split, what is your tax basis in – your original 100 shares? your “new” 100 shares?
Frank has 200 shares of XYZ, Inc. with a basis of $5,000 and a value of 7,500. He receives a tax-free stock dividend of 50 additional shares, worth $2,500. (a) After the stock dividend, what is his per share basis in the stock? In other words, if he sells 1 share of stock, what is the basis in that share for determining the gain on the sale of the share? (b) Suppose it was a tax-free dividend, but the 50 new shares were of preferred stock – what would his basis be in common stock and in the preferred stock?
1.) The client inherited stocks from their grandfather when he passed away. Their grandfather bought half of them a month ago for $100,000 and they are now worth $150,000. The other half was purchased two years ago for $250,000 and they are now worth $500,000. The client wants to sell them tomorrow - what will the tax consequences be?
Abby purchased 100 shares of her father’s favorite stock for $27 per share exactly 1 year ago, commission free. She sold it today for a total amount of $3125. She plans to invest the entire amount in a different corporation’s stock today, but she must now pay a $30 commission fee. If she plans to sell this new stock exactly 1 year from now and realize the same return as she has just made, what must be the total amount she receives next year? Include the commission fee as a part of the purchase price, but neglect any tax effects. What is the total amount that she receives next year?
You are a shareholder in a corporation. The corporation earns $5 per share before taxes. After it has paid taxes, it will distribute the rest of its earnings to you as dividend. The corporate tax rate is 30% and your personal tax rate on dividend income is 25%. What is the amount of your after-tax earnings on dividend? a. 0.875 b. 1.25 c. 1.875 d. 2.625 e. 3.50
1. Melanie owns 25% of the stock of the Gimli Corporation. The tax rate on dividend income is 26%. If Gimli makes a dividend payment of $30,000,000 paid proportionally to its shareholders, how much of this amount would Melanie receive after taxes?
You own 100 shares of a "C" Corporation. The corporation earns $5.00 per share before taxes. Once the corporation has paid any corporate taxes that are due, it will distribute the rest of its earnings to its shareholders in the form of a dividend. If the corporate tax rate is 40% and your personal tax rate on (both dividend and non-dividend) income is 30%, then how much money is left for you after all taxes have been paid? A) $210 B) $300 C) $350 D) $500
Maggie owns 100 shares of FloorMart, Inc. The firm pays a semi-annual dividend of $0.75 per share and offers the option to reinvest the cash dividends into additional shares of company stock. If the stock is selling for $55.00 per share, how many shares of stock will Maggie receive each dividend period if she chooses the dividend reinvestment plan?
What are the tax implications of allowing an investor to contribute $100,000 to my corporation for a 20% share? I currently own 100% of the business. Simply put, what are the pros and cons of allowing someone to invest from a tax perspective?
This morning Sophia sold 500 shares of Multiface Consulting for $75.60 per share. She purchased the stock for $70 one year ago. During the time she held the stock, Sophia received two dividend payments; one dividend payment was $1.00 per share and the other dividend payment was $1.10 per share. What yield (rate of return) did Sophia earn on her investment for the year she held the Multiface stock?
Since Garnet Corporation was formed five years ago, its stock has been held as follows: 525 shares by Frank and 175 shares by Grace. Basis in the stock is $350,000 for Frank and $150,000 for Grace. As part of a stock redemption, Garnet redeems 125 of Frank’s shares for $175,000 and 125 of Grace’s shares for $175,000. What are the tax consequences of the stock redemption to Frank and Grace? Be sure to review Chapter 6 on stock redemptions. How would the tax consequences to Frank and Grace be different if, instead of the redemption, they each sold 125 shares to Chuck (an unrelated party)? What factors should influence their decision on whether to redeem or sell the 250 shares of stock?
Since Garnet Corporation was formed five years ago, its stock has been held as follows: 525 shares by Frank and 175 shares by Grace. Basis in the stock is $350,000 for Frank and $150,000 for Grace. As part of a stock redemption, Garnet redeems 125 of Frank’s shares for $175,000 and 125 of Grace’s shares for $175,000. What are the tax consequences of the stock redemption to Frank and Grace? Be sure to review Chapter 6 on stock redemptions. How would the tax consequences to Frank and Grace be different if, instead of the redemption, they each sold 125 shares to Chuck (an unrelated party)? What factors should influence their decision on whether to redeem or sell the 250 shares of stock? I need help with calculating Grace recognized long-term capital gain, I know Frank is 175,000 however cant figure out Grace.