Identify Which of the Following Statements Is False

question 59

Multiple Choice

Identify which of the following statements is false.

• A) The holding period for stock rights includes the holding period for the underlying stock.
• B) The distribution of stock rights is generally tax free under Sec. 305.
• C) The distribution of stock rights will be taxable if the value of the stock rights is more than 15% of the value of the underlying stock.
• D) If the value of stock rights is less than 15% of the value of the underlying stock, the basis of the rights is zero unless the shareholder elects to allocate basis to the rights.

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Definitions:

Equity Repurchases

The method through which a corporation repurchases its shares from the market, thus decreasing the total number of shares available.

Fixed Cost

Expenses that do not change in total regardless of the level of production or sales activity, such as rent, salaries, and insurance.

Raw Materials

Raw materials are the basic substances or components used in the manufacture or production of goods.

Direct Labour

The labor costs associated with employees who are directly involved in the production of goods or services.