Which of the Following Stock Distributions Would Be Tax-Free to the Shareholder

question 17

Multiple Choice

Which of the following stock distributions would be tax-free to the shareholder?

• A)A 2-for-1 stock split to all holders of common stock.
• B)A stock distribution where the shareholder could choose between cash and stock.
• C)A stock distribution to all holders of preferred stock.
• D)A 2-for-1 stock split to all holders of common stock and a stock distribution to all holders of preferred stock are tax-free to the shareholder.

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Definitions:

Trading Partners

Countries, organizations, or individuals that engage in the exchange of goods, services, or information.

Joint Output

Products or services that are produced together in the course of a single production process, often resulting in a correlation between their quantities or prices.

Comparative Advantage

The ability of a country or entity to produce a good or service at a lower opportunity cost than others.

Opportunity Costs

The decline of potential rewards from different options as a result of choosing one.