Wonder Corporation Declared a Common Stock Distribution to All Shareholders

question 65

Multiple Choice

Wonder Corporation declared a common stock distribution to all shareholders of record on September 30, 20X3. 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, 20X3. 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:

Supercharger

A device that increases the pressure or density of air supplied to an internal combustion engine, enhancing its power output.

Exhaust Pressure

The pressure generated by gases as they are expelled from an engine’s combustion chamber through the exhaust system.

Throttle Valve

A valve that regulates the flow of air into the engine's intake manifold, controlling the engine's power and speed.

Airflow

The movement of air around or through objects, particularly relevant in contexts such as ventilation, aerodynamics, and cooling systems.