Checkers Corporation Has a Single Class of Common Stock Outstanding

question 4

Essay

Checkers Corporation has a single class of common stock outstanding. Bert owns 100 shares, which he purchased five years ago for $200,000. In the current year, when the stock is worth $2,500 per share, Checkers Corporation declares a 10% stock dividend payable in common stock. Bert receives ten additional shares on December 10 of the current year. On January 25 of next year he sells all ten shares for $30,000.
a)How much income must Bert recognize when he receives the stock dividend?
b)How much gain or loss must Bert recognize when he sells the ten shares he received as a stock dividend?

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Definitions:

Twin Studies

Research studies that compare the similarity between monozygotic (identical) and dizygotic (fraternal) twins to assess genetic and environmental influences.

Adoption Studies

Research investigations that compare the traits and behaviors of adopted children to those of their biological and adoptive families, often used to understand the influence of genetics versus environment.

Heredity

The passing on of traits from parents to their offspring, either through asexual reproduction or sexual reproduction.

Environment

Consists of all the external physical and biological factors that affect an individual or organism's growth and development.