Two years ago you purchased 100 shares of ABC Corp. common stock for $8,000. Today ABC did a stock split, meaning that (i) you now own 200 shares and (ii) all of ABC’s other common shareholders also now hold 2x the number of shares owned yesterday. (a) Your basis in your original 100 shares remains $80 per share while your basis in your new 100 shares is $0. (b) Your basis in your original 100 shares remains $80 per share while your basis in your new 100 shares is the FMV of the ABC stock received as determin-ed by today’s NYSE price. (c) Your basis in all 200 shares of your ABC stock is now $40 per share. Choose (a), (b) or (c) and defend your choice in 2-3 sentences.

Two years ago you purchased 100 shares of ABC Corp. common stock for $8,000. Today ABC did a stock split, meaning that (i) you now own 200 shares and (ii) all of ABC’s other common shareholders also now hold 2x the number of shares owned yesterday. (a) Your basis in your original 100 shares remains $80 per share while your basis in your new 100 shares is $0. (b) Your basis in your original 100 shares remains $80 per share while your basis in your new 100 shares is the FMV of the ABC stock received as determin-ed by today’s NYSE price. (c) Your basis in all 200 shares of your ABC stock is now $40 per share. Choose (a), (b) or (c) and defend your choice in 2-3 sentences.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter9: Acquisitions Of Property

Section: Chapter Questions

Problem 80IIP

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