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5(a) Steve purchased 5,000 shares of Apple Corp...

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5(a) Steve purchased 5,000 shares of Apple Corporation stock at $10 per share. Two years later, he receives a 5% common stock dividend. At that time, the common stock of Apple Corporation had a fair market value of $12.50 per share. What is the total basis of the Apple Corporation stock, the per share basis, and gain recognized upon receipt of the common stock dividend? a. $50,000 basis in stock, $10 basis per share for the original stock and $0 basis per share for the dividend shares, $0 recognized gain. b. $50,000 basis in stock, $9.52 basis per share, $0 recognized gain. c. $53,125 basis in stock, $10 basis per share for the original stock and $12.50 basis per share for the dividend shares, $3,125 recognized gain. d. $53,125 basis in stock, $10.12 basis per share, $3,125 recognized gain. e. None of the above. 5(b) Jenny received nontaxable stock rights on June 9, 2009. She allocated $3,800 of the $20,000 basis for the associated stock to the stock rights. The stock rights are exercised on October 12, 2009. The exercise price for the stock is $11,000. What is the taxpayer's basis for the acquired stock? a. $0. b. $7,200. c. $11,000. d. $14,800. e. None of the above. 5(c) Cynthia gives her son stock with a basis in her hands of $65,000 and a fair market value of $60,000. No gift tax is paid. Son subsequently sells the stock for $63,000. What is his recognized gain or loss? a. $0. b. $2,000 Loss c. $3,000 Gain d. $63,000 Gain e. None of the above. 5(d) On July 10, 2009, Bruce purchased an option to buy 1,000 shares of Omni, Inc. at $30 per share. He purchased the option for $2,000. It was to remain in effect for five months. The market experienced a decline during the latter part of the year, so Bruce decided to let the option lapse as of December 1, 2009. On his 2009 tax return, what should Bruce report? a. A $2,000 long-term capital loss. b. A $2,000 short-term capital loss. c. A $2,000 ? 1231 loss. d. A $2,000 ordinary loss. e. None of the above.

 

Paper#6040 | Written in 18-Jul-2015

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