On January 30, Juan Receives a Nontaxable Distribution of Stock

question 122

Multiple Choice

On January 30, Juan receives a nontaxable distribution of stock rights from Platinum Corporation. Each right entitles the holder to purchase one share of stock for $40. One right is issued for every share of stock owned. Juan owns 100 shares of stock purchased two years ago for $4,000. At the date of distribution, the rights are worth $1,000 (100 rights at $10 per right) and Juan's stock in Platinum is worth $5,000 (or $50 per share) . On December 1, Juan sells all 100 stock rights for $12 per right. How much gain does Juan recognize on the sale?

• A) $1,200
• B) $533
• C) $400
• D) $0
• E) None of these.

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Definitions:

Internal Locus

A psychological term referring to individuals who believe they can influence their life events and outcomes through their own efforts.

High Conscientiousness

A personality trait characterized by diligence, carefulness, thoroughness, self-discipline, and the ability to regulate oneself effectively.

Self-efficacy

The belief in one's own ability to execute behaviors necessary to produce specific performance attainments.

Previous Performance

The past results or outcomes achieved by an individual or organization, often used as a benchmark for future activities.