Wonder Corporation Declared a Common Stock Dividend to All Shareholders

question 69

Multiple Choice

Wonder Corporation declared a common stock dividend to all shareholders of record on September 30, 20X3. Shareholders will receive three shares of Wonder stock for each five shares of stock they already own. Diana owns 300 shares of Wonder stock with a tax basis of $90 per share (a total basis of $27,000) . The fair market value of the Wonder stock was $180 per share on September 30, 20X3. What are the tax consequences of the stock dividend to Diana?

• A) $0 dividend income and a tax basis in the new stock of $180 per share
• B) $0 dividend income and a tax basis in the new stock of $67.50 per share
• C) $0 dividend income and a tax basis in the new stock of $56.25 per share
• D)$10,800 dividend and a tax basis in the new stock of $180 per share

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Definitions:

Cost to Sellers

The total expenses that a seller has to bear to produce and sell a product, including production, marketing, and distribution costs.

Increase in Demand

A situation where more consumers are willing to purchase a product at a given price, often due to changes in income, tastes, or the price of related goods.

Decrease in Demand

A decrease in demand refers to a fall in the quantity of a product that consumers are willing and able to purchase at various prices, typically leading to a downward shift in the demand curve.

Peanut-Growing South

Refers to regions in the Southern United States that are prominent in the cultivation and production of peanuts.