Etta Received Nontaxable Stock Rights on October 3, 2012

question 182

Multiple Choice

Etta received nontaxable stock rights on October 3, 2012.She allocated $12,000 of the $30,000 basis for the associated stock to the stock rights.The stock rights are exercised on November 8, 2012.The exercise price for the stock is $42,000.What is Etta's basis for the acquired stock?

• A)$12,000.
• B)$42,000.
• C)$54,000.
• D)$72,000.
• E)None of the above.

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Definitions:

Capacity

The legal ability, competency, or power to enter into a contract.

Legality

The state or quality of being in accordance with the law; adherence to the law.

Simple Contract

A contract that can be either oral or written, as opposed to a formal contract which requires a special form or method of creation.

Informal Contract

An oral or written contract that is not under a seal or is not a contract of record. Also called simple contract.