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On January 30, Juan Receives a Nontaxable Distribution of Stock

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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?


Definitions:

Five-Carbon Sugar

A type of sugar molecule that contains five carbon atoms, examples include ribose and deoxyribose, important in RNA and DNA structures.

Plasmids

Small, circular, double-stranded DNA molecules found in bacteria and some yeasts, separate from chromosomal DNA and often carry genes beneficial for survival.

Circular DNA

DNA that forms a closed-loop structure, characteristic of bacterial chromosomes and plasmids, facilitating gene transfer and replication.

Bacterial Chromosome

The circular DNA molecule within bacteria that contains most of the genetic material required for their cell processes.

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