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.

---

Definitions:

Expected Value

An average value determined by weighing all potential outcomes of a random variable according to their likelihood of happening.

Payoffs

The returns or benefits received from a particular course of action or decision, often evaluated in decision-making processes.

Invest

Allocating resources, usually money, with the expectation of generating an income or profit.

Scrap Value

The estimated residual value of an asset after it has reached the end of its useful life, often associated with the material worth of its components.