Identify Which of the Following Statements Is False

question 107

Multiple Choice

Identify which of the following statements is false.

• A)The distribution of stock rights will be taxable if the value of the stock rights is more than 15% of the value of the underlying stock.
• B)The distribution of stock rights is generally tax free under Sec. 305.
• C)If the value of stock rights is less than 15% of the value of the underlying stock, the basis of the rights is zero unless the shareholder elects to allocate basis to the rights.
• D)The holding period for stock rights includes the holding period for the underlying stock.

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Definitions:

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity of output produced, representing the per-unit cost of production.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced. This decreases as production increases.

Total Variable Costs

Expenses that change in proportion to the activity of a business such as materials, labor, and utilities, which vary with the level of output.

Average Fixed Cost

Production's fixed expenses (unchanged by the amount of production) split by the quantity of product made.