Tappan Declared a 100 Percent Stock Distribution to All Shareholders

question 48

Essay

Tappan declared a 100 percent stock distribution to all shareholders of record on May 2 of this year. Prior to the distribution, Tappan reported current E&P of $60,000 and accumulated E&P of $30,000. Prior to the split, Barb owned 100 shares of Tappan stock, with a market value of $150 per share and a tax basis of $100 per share. After the distribution, Barb owned 200 shares of Tappan, with a market value of $80 per share. What is the per-share tax basis of Barb's additional 100 shares?

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Definitions:

FOB Destination

A shipping term indicating that the seller bears the cost and risk of transporting goods until they are delivered to the buyer's location.

Physical Inventory

The process of counting and verifying the actual stock in a business at a specific point in time.

Perpetual Inventory System

A digital system for inventory management that immediately documents any inventory sale or purchase using electronic point-of-sale systems along with enterprise asset management software.

MasterCard and VISA

Major global payment networks and companies facilitating electronic funds transfers through branded credit, debit, and prepaid cards.