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

question 1881

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

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Definitions:

Cost Of Goods Sold

An accounting term for the direct costs attributable to the production of the goods sold by a company.

Inventory Items Sold

The total number of product units a company has sold to its customers during a specific period.

Materials Cost

The total expense incurred for the materials that are used in the production of goods or services.

Purchase Order

A document generated by a buyer and sent to a seller specifying products or services to be purchased.