El Toro Corporation Declared a Common Stock Distribution to All

question 48

Multiple Choice

El Toro Corporation declared a common stock distribution to all shareholders of record on June 30, 20X3. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 300 shares of El Toro stock with a tax basis of $60 per share. The fair market value of the El Toro stock was $100 per share on June 30, 20X3. What are the tax consequences of the stock distribution to Raoul?

• A) $0 dividend income and a tax basis in the new stock of $100 per share.
• B) $0 dividend income and a tax basis in the new stock of $60 per share.
• C) $0 dividend income and a tax basis in the new stock of $40 per share.
• D) $15,000 dividend and a tax basis in the new stock of $100 per share.

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Definitions:

Stylus

A tool or device designed for writing, drawing, or inputting commands on a touchscreen or similar surface.

ECG

A medical test used to record the heart's electrical activity in order to diagnose different heart diseases.

Centering Control

A method or technique used to maintain focus and balance, often applied in psychology or physical activities.

Holter Monitoring

A continuous, portable form of electrocardiography, used to record heart activity over a 24 to 48-hour period during normal activities.