On November 1, 2018, Bob, a Cash Basis Taxpayer, Gave

question 13

Multiple Choice

On November 1, 2018, Bob, a cash basis taxpayer, gave Dave common stock. On October 30, 2018, the corporation had declared the dividend payable to shareholders of record as of November 22, 2018. The dividend was paid on December 15, 2018. The corporation has paid the $1,200 dividend once each year for the past ten years, during which Bob owned the stock. When Dave collected the dividend on December 15, 2018:

• A) Bob must include $1,000 (10/12 x $1,200) of the dividend in his gross income.
• B) Bob must include all of the dividend in his gross income.
• C) Dave must include all of the dividend in his gross income.
• D) Dave should treat the $1,200 as a recovery of capital.
• E) None of these is correct.

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Definitions:

P/E Ratios

The Price-to-Earnings Ratio is a valuation metric used to measure a company's current share price relative to its per-share earnings.

Average Returns

The arithmetic mean of a series of returns generated over a period of time.

Dividend Yields

Dividend yields represent the ratio of a company's annual dividend payments to its current stock price, indicating how much an investor earns in dividends relative to the share price.

Abnormal Returns

Financial gains or losses that deviate from the expected market return, indicating better or worse performance than the market average.