Wonder Corporation Declared a Common Stock Distribution to All Shareholders

question 22

Multiple Choice

Wonder Corporation declared a common stock distribution to all shareholders of record on September 30, year 1.Shareholders will receive three shares of Wonder stock for each five shares of stock they already own.Diana owns 300 shares of Wonder stock, with a tax basis of $90 per share (a total basis of $27,000) .The fair market value of the Wonder stock was $180 per share on September 30, year 1.What are the tax consequences of the stock distribution to Diana?

• A)$0 dividend income and a tax basis in the new stock of $180 per share.
• B)$0 dividend income and a tax basis in the new stock of $67.50 per share.
• C)$0 dividend income and a tax basis in the new stock of $56.25 per share.
• D)$10,800 dividend and a tax basis in the new stock of $180 per share.

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Definitions:

Low-Income Families

Households earning significantly below the median income of their geographical location, often leading to financial stress and limited access to resources.

Behavioral Changes

Modifications or adaptations in human or animal behavior, often as a result of psychological, social, or environmental factors.

Day Care

A service that provides care and supervision for children during the day, particularly while parents are at work.

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Pertains to or comparing different cultures or the comparison of different societal norms and values.