El Toro Corporation Declared a Common Stock Distribution to All

question 27

Multiple Choice

El Toro Corporation declared a common stock distribution to all shareholders of record on June 30, 20X3. Shareholders will receive one share of El Toro stock for each two shares of stock they already own. Raoul owns 300 shares of El Toro stock, with a tax basis of $60 per share. The fair market value of the El Toro stock was $100 per share on June 30, 20X3. What are the tax consequences of the stock distribution to Raoul?

• A)$0 dividend income and a tax basis in the new stock of $100 per share.
• B)$0 dividend income and a tax basis in the new stock of $60 per share.
• C)$0 dividend income and a tax basis in the new stock of $40 per share.
• D)$15,000 dividend and a tax basis in the new stock of $100 per share.

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Definitions:

Cybercrime

Illegal activities executed on the Internet.

Interconnected

Describes systems or devices that are connected to each other through various communication channels, allowing for interaction and data exchange.

Human Error

Mistakes made by people, especially in operating machinery or computing devices, often leading to accidents or data loss.

Unintentional

Unintentional refers to an action or outcome that occurs without intention or planning, often leading to unplanned results or accidents.