Jose Receives a Nontaxable Distribution of Stock Rights During the Year

question 19

Multiple Choice

Jose receives a nontaxable distribution of stock rights during the year from Gold Corporation on January 30. Each right entitles the holder to purchase one share of stock for $50. One right is issued for every share of stock owned. Jose owns 100 shares of stock purchased two years ago for $5,000. At the date of distribution, the rights are worth $1,000 (100 rights at $10 per right) and Jose's stock in Gold is worth $6,000 (or $60 per share) . On December 1, Jose sells all stock rights for $13 per right. How much gain does Jose recognize on the sale?

• A) $1,300.
• B) $586.
• C) $500.
• D) $0.
• E) None of the above.

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