El Toro Corporation Declared a Common Stock Distribution to All

question 111

Multiple Choice

El Toro Corporation declared a common stock distribution to all shareholders of record on June 30,year 1.Shareholders will receive 1 share of El Toro stock for each 2 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,year 1.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:

Collateral Characteristics

Attributes or features that are parallel or supplementary to the main qualities or aspects of something or someone.

Personal Qualities

The characteristics, traits, or attributes that define an individual’s personality or demeanor.

Integrally Involved

Being essential or fundamental to the entirety of a process, activity, or existence.

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The process of forming opinions or conclusions about people, situations, or objects based on the information available, experiences, and reasoning.