El Toro Corporation Declared a Common Stock Dividend to All

question 25

Multiple Choice

El Toro Corporation declared a common stock dividend to all shareholders of record on June 30,20X3.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 30,20X3.What are the tax consequences of the stock dividend 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:

Effective Benefits Program

A well-designed package of employee benefits that supports the overall well-being and financial security of the workforce, thereby enhancing job satisfaction and loyalty.

Defined-Contribution

A type of retirement plan where an employer, employee, or both make contributions, but future benefits depend on investment performance.

Defined-Benefit Pension Plans

Retirement plans where the employer guarantees a specific retirement benefit amount based on factors such as salary history and duration of employment.

Childcare

The care and supervision of a child or children, typically from infancy to age thirteen, by a person other than the child's legal guardians.