The Recipient of a Tax-Free Stock Distribution Will Have a Zero

question 93

True/False

The recipient of a tax-free stock distribution will have a zero tax basis in the stock.

---

Definitions:

WACC

Stands for Weighted Average Cost of Capital, which calculates a firm's cost of capital, considering the proportion of each capital component, including debt and equity.

NPV

Net Present Value (NPV) is the calculation used to find today’s value of a future stream of payments, subtracting the initial investment.

Cash Flow

The complete financial movement into and out of a corporation, especially regarding its liquidity.

Equivalent Annual Annuity

A calculation used to compare the returns of investments with different payment schedules by converting them into an equivalent sum received at regular annual intervals.