Donna owns 800 shares of common stock in Macaw Corporation (adjusted basis of $40,000). She receives a 5% stock dividend when the stock is selling for $60 per share. How much gross income must Donna recognize because of the stock dividend? What is Donna's basis for her 840 shares of stock?

Question

Dakota Mcguire

Business

26 March, 18:12

Donna owns 800 shares of common stock in Macaw Corporation (adjusted basis of $40,000). She receives a 5% stock dividend when the stock is selling for $60 per share. How much gross income must Donna recognize because of the stock dividend? What is Donna's basis for her 840 shares of stock?

+3

Answers (1)

Know the Answer?

Tripp French · Answer 1

The gross income Donna needs to recognize from stock dividend is ZERO.

Donna's basis for her 840 shares of stock is $47.62.

Explanation:

Assuming that Donna does not have any option to recieve dividend in form of cash, the stock devidend will be non-taxable.

Therefore, The gross income Donna needs to recognize from stock dividend is ZERO.

Adjusted basis per share after dividend

= Adjusted basis of 800 shares/number of shares

= $40,000/840

= $47.62

Therefore, Donna's basis for her 840 shares of stock is $47.62.