Checkers Corporation Has a Single Class of Common Stock Outstanding

question 4

Essay

Checkers Corporation has a single class of common stock outstanding. Bert owns 100 shares, which he purchased five years ago for $200,000. In the current year, when the stock is worth $2,500 per share, Checkers Corporation declares a 10% stock dividend payable in common stock. Bert receives ten additional shares on December 10 of the current year. On January 25 of next year he sells all ten shares for $30,000.
a)How much income must Bert recognize when he receives the stock dividend?
b)How much gain or loss must Bert recognize when he sells the ten shares he received as a stock dividend?

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Definitions:

Groupthink

A psychological phenomenon occurring within a group of people, where the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Brainstorming

A creative group problem-solving and idea-generating technique designed to stimulate lateral thinking and produce a wide range of ideas.

Specialize

To focus on and become an expert in a particular area or field.

Self-Censorship

The act of withholding or altering one's expression or opinions to avoid offending others or to conform to societal norms.