Question

What are the tax consequences to Euclid from the following independent events? In your computations, do not round intermediate division.

If required, round the per share answer to two decimal places. Round all other answers to the nearest dollar

a. Euclid bought 500 shares of common stock five years ago for $128,000. This year, Euclid receives 20 shares of common stock as a nontaxable stock dividend.

As a result of the stock dividend, Euclid's per share basis is $.

b. Assume instead that Euclid received a nontaxable preferred stock dividend of 20 shares. The preferred stock has a fair market value of $12,800, and the common stock, on which the preferred is distributed, has a fair market value of $192,000.

After the receipt of the stock dividend, the basis of the preferred stock is $, and the basis of the common stock is $ .

Answer 1

Az az Euclid's Per Share Basis $ 12,8000 500 = $ 256 per share by Common Stock $ 1,92,000 Preferred Stock 28.000 $2,04,800 After the receipt of stock dividend, the basis $12,800 Preferred Stock $ 2,04,800 X $ 1,28,000 $ 8,000 Common stock $ 1,92,000 x $128,000 $ 2,04,800 he --- $ 120,000