Sweetwater Corporation Declared a Stock Distribution to All Common Stock

question 63

Essay

Sweetwater Corporation declared a stock distribution to all common stock shareholders of record on December 31, 20X3. Shareholders will receive 1 share of Sweetwater common stock for each 5 shares of common stock they already own. Pierre Dorgan owns 500 shares of Sweetwater common stock with a tax basis of $150 per share. The fair market value of the Sweetwater common stock was $90 per share on December 31. What is Pierre's income tax basis per share in his new and existing common stock in Sweetwater, assuming the distribution is non-taxable?

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Definitions:

Photosynthesis

The process by which green plants, algae, and some bacteria convert light energy into chemical energy stored in glucose.

Carbon

A chemical element with symbol C and atomic number 6, essential to all known life forms and the basis of organic chemistry.

Food Web

A complex network of interconnected food chains within an ecological community, illustrating how different organisms are related through what they consume and are consumed by.

Green Plants

Organisms that perform photosynthesis, using sunlight, carbon dioxide, and water to produce oxygen and carbohydrates, playing a crucial role in Earth's ecosystems.