Bob Owns 100 Shares of ACT Corporation Common Stock with a Basis

question 34

Multiple Choice

Bob owns 100 shares of ACT Corporation common stock with a basis of $3,500 and a FMV of $12,000.Bob receives 10 stock rights as a nontaxable distribution,and no basis is allocated to the stock rights.With each stock right,Bob may acquire one share of stock for $25.Bob exercises all 10 stock rights.The total basis of the newly acquired stock is

• A)$0.
• B)$250.
• C)$350.
• D)$1,200.

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Definitions:

Antitrust Policy

Legislation enacted by federal or state government to prevent new monopolies from forming and to break up those that already exist in order to promote competition and ensure fair practices in the marketplace.

Monopolies

A market structure characterized by a single seller who has exclusive control over a product or service, with no close substitutes.

Product Differentiation

The practice of highlighting the unique features of a product or service to increase its appeal to a targeted market segment.

Price Wars

A competitive situation in which retailers repeatedly cut prices in order to undercut each other, often to the detriment of profit margins.