Checkers Corporation Has a Single Class of Common Stock Outstanding

question 4

Essay

Checkers Corporation has a single class of common stock outstanding. Bert owns 100 shares, which he purchased five years ago for $200,000. In the current year, when the stock is worth $2,500 per share, Checkers Corporation declares a 10% stock dividend payable in common stock. Bert receives ten additional shares on December 10 of the current year. On January 25 of next year he sells all ten shares for $30,000.
a)How much income must Bert recognize when he receives the stock dividend?
b)How much gain or loss must Bert recognize when he sells the ten shares he received as a stock dividend?

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Definitions:

Cross-Sequential Research

A research method combining both longitudinal and cross-sectional studies to analyze changes across different ages and cohorts over time.

Cohort Effect

Similarities in behavior among a group of peers that stem from the fact that group members were born at the same time in history.

Longitudinal

A study or research design that follows the same subjects over a period of time to observe changes or development.

Cross-Sectional

A type of observational study that analyzes data from a population at a specific point in time.