Two Days Before the Ex-Dividend Date,Drexel Corporation Buys 100 Shares

question 112

Multiple Choice

Two days before the ex-dividend date,Drexel Corporation buys 100 shares of Zebra Corporation stock (less than 1%) for $200,000.Drexel Corporation receives $10,000 of dividends from Zebra Corporation.Two weeks after the ex-dividend date,Drexel Corporation sells the Zebra Corporation stock for $190,000.Which of the following statements is correct?

• A)Drexel Corporation cannot recognize a capital loss.
• B)Drexel Corporation cannot take a dividends-received deduction on the Zebra Corporation dividend.
• C)Drexel Corporation will be allowed a 70% dividends-received deduction when reporting the Zebra Corporation dividend.
• D)Drexel Corporation will receive no dividends-received deduction because the stock was purchased ex-dividend.

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Definitions:

Sufficient Funds

Availability of enough money or resources to meet financial obligations or complete transactions.

Certificate Of Deposit

A document whereby a bank promises to pay a payee a certain amount of money at a future time.

Promise

A declaration or assurance that one will do something or that a particular thing will happen.

Accord

An agreement in the context of contract law where one party agrees to accept a substitute form of satisfaction from the other party.